USD/JPY: more downside to follow?
USD/JPY dipped to 117.40 on the past week on the wave the overall US dollar selloff. As can be seen from the weekly chart, the market formed a bearish engulfing candle. The pair still remains badly overbought and we concede more bearish correction to follow. Break below 117.00 yen would open the way to 115.00 and then, potentially, to 112.00 yen by the year-end. We will review this pullback as a good opportunity to buy US dollar on dips.
Next week the both the US Fed and the Bank of Japan will hold their monetary policy meetings – on Wednesday and on Friday respectively. According to the recent BOJ meeting minutes, some members expressed concern that the aggressive monetary stimulus could have a “negative side effect” on the economy. If the idea will be confirmed in December, Japanese yen could strengthen further.