USD/JPY Fundamental Daily Forecast – U.S. Economic Data at Forefront This Week

The Dollar/Yen sold off early in the session on Monday before rebounding to break-even. There was no major news overnight, but investors continued to interpret last week’s Fed Monetary Policy decision, in which the central bank hinted it would begin trimming its balance sheet as early as September. Traders also continued to digest Friday’s underwhelming U.S. Gross Domestic Product report.

At 0855, the USD/JPY is trading 110.667, up 0.005 or 0.00%.

If investors were concerned about U.S. political uncertainty and geopolitical concerns over the situations in North Korea or Venezuela, they weren’t reflecting these concerns in the Forex market.

There is no Fed meeting in August so investors will rely on U.S. economic data for direction. Any data that indicates uncertainty over the Fed’s ability to raise rates this year or next will be bearish for the USD/JPY.

U.S. political uncertainty could keep a lid on the USD/JPY by keeping the dollar on the defensive. Last week’s turmoil in the White House may encourage stock investors to trim their long positions. We’ll know if they are if they start to sell after strong earnings.

At this time, there is uncertainty over the Republican Senate’s ability to repeal and replace Obamacare. Investors also don’t know if Trump will be able to implement tax reforms and economic stimulus in the near future.

Finally, USD/JPY investors may be waiting for a response by the U.S. to the escalating tensions over North Korea. This issue also involves China and Russia.

Forecast

Earlier today, Japan said that Preliminary Industrial Production rose 1.6% as expected. This was well-above the previous -3.5% read. Year-over-year Housing Starts also rose 1.7%, well above the 0.1% estimate and -0.3% previous read.

In the U.S. today, traders will get the opportunity to react to the latest data on Chicago PMI and Pending Home Sales. Chicago PMI is expected to come in at 60.8, down from last month’s 65.7 read. Pending Home Sales are expected to rise 0.9%, up from the previous read of -0.8%.

The USD/JPY could find support today if the economic data pushes up U.S. Treasury yields and if the U.S. stock indexes rally.

The USD/JPY will likely feel downside pressure if the data is bad and yields fall. Lower stock indexes should help to boost demand for the Japanese Yen because of the carry trade.