USD/JPY Fundamental Weekly Forecast – Watch for Tax Reform News This Week

The Dollar/Yen posted a two-sided trade on low volume before settling slightly higher. The Forex pair was rangebound all week with many of the major players on the sidelines ahead of Fed Chair Janet Yellen’s speech at the Jackson Hole conference on Friday. The price action in the USD/JPY basically tracked the movement in U.S. Treasury yields.

The USD/JPY finished the week at 109.323, up 0.131 or +0.12%.

In Japan, Flash Manufacturing PMI came in higher than expected at 52.8. Tokyo Core CPI grew 0.4%, higher than expected. National Core CPI was 0.5%, equaling the forecast.

In other news, the U.S. Dollar traded in several directions throughout the week. Providing support for the U.S. Dollar was increased speculation Republicans and Trump were getting closer to announcing their tax reform plan.

The Greenback was pressured early in the week after U.S. President Donald Trump suggested a shutdown of the government was possible and threatened to terminate the North American Free Trade Agreement. Late in the week, the U.S. Dollar fell after Fed Chair Janet Yellen delivered what traders considered to be a dovish speech at the central bankers’ conference at Jackson Hole.

Forecast

The USD/JPY begins the week in a critical area on the charts.

Overcoming 109.919 will indicate the presence of buyers. A trade through 110.944 will change the main trend to up.

A sustained move under 109.919 will signal the presence of sellers. The downtrend will resume on a move through 108.597. Taking out 107.856 could trigger an acceleration to the downside.

There are no major reports in Japan this week, but several minor reports including Household Spending, BOJ Core CPI, Retail Sales, Housing Starts and Final Manufacturing PMI.

In general, the USD/JPY will be influenced this week by the direction of U.S. Treasury yields and risk sentiment.

Helping to support the USD/JPY could be the announcement of Trump’s long-awaited tax reform plan. President Trump’s chief economic advisor Gary Cohn said the President will start publicly campaigning for highly-anticipated tax reform next week. Cohn told the Financial Times that Trump will begin calling for long-awaited reform next Wednesday when he visits Missouri.

In other news, investors will get the opportunity to react to the latest U.S Preliminary GDP report. It is expected to show an increase of 2.7%, up slightly from the previous 2.6%.

On Friday, the U.S. will deliver its latest report on Non-Farm Payrolls. The headline number is expected to show the economy added 180K jobs. The Unemployment Rate is expected to come in at 4.3% and Average Hourly Earnings are expected to rise 0.2%, a little below the previous 0.3%.