USD/JPY Fundamental Daily Forecast – Weakening on Position-Squaring After 10-Day Rally

The Dollar/Yen is retreating after early session strength. The weakness is not related to any economic data so we’ll have to chalk it up to position-squaring and profit-taking after a 10-day rally.

At 1155 GMT, the USD/JPY is trading 113.355, down 0.104 or -0.09%.

In other news, in Japan, BSI Manufacturing Index came in at 9.7, lower than the forecast. M2 Money Stock was 4.0%, also below the estimate. Preliminary Machine Tool Orders were 46.9%, down from the previous 49.8%.

Forecast

Today’s price action suggests the current rally may have run its course, putting the USD/JPY in a position to post a short-term pullback. Technically, the Forex pair may have reached overbought territory.

Fundamentally, traders may be lightening up ahead of U.S. consumer inflation data early Wednesday and the Fed’s interest rate decision Wednesday afternoon.

Information about tax reform is likely to be day-to-day while the Senate and House work out their differences. However, if they reach an agreement today then the Dollar/Yen is likely to rally.

Later today, investors will get the opportunity to react to the latest JOLTS Job Openings report. It is expected to come in at 6.03M. There is also a 10-Year Treasury Bond Auction this afternoon.

The USD/JPY is currently in a position to post a potentially bearish closing price reversal top. This could trigger a 2 to 3 day correction into the Fed’s interest rate announcement. Position-squaring ahead of the Fed meeting will be one catalyst today. Another will be demand for risky assets. A sell-off in U.S. equity markets could help accelerate the weakness in the Dollar/Yen.