USD/JPY Is Bluffing
Helen Rush | Dec 01, 2017 07:33AM ET
USD/JPY had been growing since Tuesday before it settled above the 112.00 level. One of the reasons for the recovery, apart from the approval of the tax-cut bill, was a technical correction.
But today we see another decline. As usual, USD lost some points due to weaker Treasury yields. But, also, the market is now concentrated on the Fed’s monetary policy path for 2018.
From the one side, Yellen’s comments confirmed the idea the current inflation and economic stance does not require the immediate rate hike in the near future after December. This may contribute to the pair’s sell-off. From the other side, the stronger-than-forecast US GDP for the third quarter, a positive outlook for the economic growth in the fourth quarter and the possible approval of the Trump’s reform are positive for the USD/JPY growth potential.
Even if USD/JPY is able to surpass the 112.50 level, the pair will meet a strong resistance area around 114.50 level. No matter what, the Yen is under pressure and the dollar is in favor. It’s unlikely that the Central Bank of the Land of the Rising Sun has the intention to start unwinding its stimulus program. The Bank of Japan is not ready to act, and it will probably maintain its expansionary policy during the upcoming months. Or years.
So, the pair’s decline is correctional. Our next target is November,24 and 28 highs at 111.60. The breakout of this area will aim the pair to the recent November lows at 111.00. We may use the current slump as a good opportunity for buying.
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