USD/JPY Fundamental Forecast – March 6, 2017
The Dollar/Yen closed lower on Friday, influenced by a potentially bearish technical chart pattern and profit-taking in the U.S. Dollar after Fed Chair Janet Yellen essentially blessed the idea of an interest rate hike on March 15. The price action suggests a “buy the rumor, sell the fact” situation developed.
The USD/JPY settled at 113.994, down 0.415 or -0.36%.
The Forex pair ran into technically driven sellers on Friday at 114.747. This was slightly below the last main top at 114.950 and a major 50% level at 115.121. This area is followed by two other main tops at 115.369 and 115.615.
If the price action continues to the downside then look for a near-term break into 113.267 to 112.869.
On the fundamental side, after several noted Fed members set the table for a rate hike later this month throughout the week, Yellen essentially sealed the deal on Friday when she said, “We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect.”
As of Friday’s close, Fed Fund futures were pricing in a 90% chance the central bank will raise rates at the March meeting, up from around 30% at the start of the week.
In economic news, Japan’s Nation Core CPI came in at 0.1%. This came as a surprise because investors were looking for a flat reading after coming in at -0.2% the previous month.
In the U.S. on Friday, ISM Non-Manufacturing PMI came in higher than expected at 57.6.
The schedule is light on Monday with the U.S. releasing a report on factory orders. It is expected to come in at 1.1%.
We could see a choppy, two-sided trade this week as investors position themselves ahead of Friday’s major U.S. Non-Farm Payrolls report. The major reports this week in Japan are Final GDP and BSI Manufacturing.