USD/JPY Fundamental Daily Forecast – Specs Will React to the News, Investors to Stocks

The USD/JPY is inching higher early Monday as the market attempts to repair itself after last week’s steep decline. There are no major fundamental reports today so traders may be reacting to a potentially bullish technical set-up on the daily chart.

Last week, the Dollar/Yen plunged on political concerns. However, since the appointment of a special prosecutor to investigate the Trump campaign’s alleged involvement with Russia over the influencing of the U.S. presidential election, the Forex and U.S. financial markets have calmed considerably.

We’re not going to hear from former FBI Director James Comey until after next week’s U.S. Memorial Day holiday. He is scheduled to testify before the Senate Intelligence Committee. We’re also not likely to hear about the matter from Trump or his administration because they probably “lawyered up”.

If the USD/JPY is going to resume last week’s sell-off then the move is likely to be triggered by sensational headlines and news stories from “unnamed sources”. It will be up to you if you want to believe the news since Comey has the answers and we won’t hear from the special prosecutor for months. So speculate as much as you want about the news because it won’t make a difference and only create volatility and price action.

Technically, I can build a case for a rally as long as the USD/JPY hold above the 111.236 to 110.495 support zone. If a rally begins to gain traction then we could see an extension of the move into 112.300 to 112.788.

A move through 111.495 will indicate that sellers have returned. The market could begin to accelerate to the downside if sellers take out 110.233 then 109.919.

Besides the news which could move the USD/JPY in either direction, Dollar/Yen traders are going to have to rely on the U.S. stock market for direction. Simply stated, if stocks continue to rally then look for the USD/JPY to follow it higher. If stocks sell-off like last week then look for money to flow into the safe have Japanese Yen.