USD/JPY Fundamental Forecast – February 17, 2017

The USD/JPY is under pressure for a third day early Friday as investors adjust to the decline in U.S. Treasury yields and profit-taking in the higher-risk U.S. stock markets. Shortly before the opening of the U.S. session, the Forex pair is trading at 112.941, down 0.286 or -0.25%.

The Dollar/Yen weakened yesterday after upbeat economic data failed to lift Treasury yields, with concerns about policy under President Trump weighing on the market as well as the diminishing chances of a Fed rate hike in March due to the lack of clarity from Fed Chair Janet Yellen earlier in the week.

The performance by the dollar this week against the Japanese Yen is disappointing because it comes during a week in which numerous reports showed the U.S. economy firing on all cylinders.

Earlier in the week, robust inflation and retail sales data as well as hawkish remarks from Yellen drove the USD/JPY to its highest level since January 27. Indicators released on Friday also shed more positive light on the U.S. economy, with the Philly Fed manufacturing index jumping to a 33-year high. However, the good news was not able to overcome Yellen’s less-hawkish commentary on Wednesday where she called the economy “disappointing.”

Forecast

The USD/JPY is likely to remain under pressure today as long as U.S. Treasury yields and U.S. equity markets continue to weaken. And this is a distinct possibility because of growing uncertainty over the policies of President Trump and economic uncertainty in Europe. Additionally, the U.S. has a bank holiday on Monday that could lead to limited trading today.