USD/JPY Weekly Fundamental Analysis, October 6 – October 10, 2014 Forecast

The USD/JPY rallied to its highest level since August 28. The strong close at 109.77 has put the Forex pair in a position to challenge a major top at 110.65.

The Forex pair was under a lot of selling pressure last week because of the weakness in the U.S. stock indices. Carry trade activity was responsible for the decline. The U.S. Dollar was able to recover against the Japanese Yen by the end of the week, following the release of the better-than-expected U.S. Non-Farm Payrolls report.

Traders had priced in a reading of 215K. The actual report showed that 248K new jobs were added to the economy. This drove up U.S. interest rates, making the U.S. Dollar a more attractive investment.

The challenge for the Bank of Japan policymakers at its October 7 meeting is justifying its rosy inflation forecasts even as a slew of weak data threatens to force the BOJ to cut their economic growth projections later this month.

The central bank is widely expected to keep monetary settings unchanged at its meeting. However, at its more critical rate review on October 31, the BOJ will produce fresh economic forecasts. Given the recent weak economic data, its growth expectations are expected to be turned down a notch.

Look for the momentum from the strong U.S. jobs report to carry over into this week, giving the USD/JPY an upside bias. Based on last week’s price action, it looks as if the only factor that could drive this Forex pair lower is another sharp sell-off in the stock market.

High Impact Economic Events That Traders Should Be Aware Of This Coming Week

Currency         Event                                                                      Forecast                           Previous

Monday, October 6

There are on high impact economic events today.

Tuesday, October 7

JPY                  Bank of Japan Monetary Policy Statement

JPY                  Bank of Japan Press Conference

Wednesday, October 8         

USD                FOMC Meeting Minutes

Thursday, October 9

USD                Unemployment Claims                                        291K                                    287K

Friday, October 10

There are on high impact economic events today.