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Currency Analyst since 2010

USD/JPY: forecast for October 12-18

By Elizaveta Belugina

USD/JPY has spent another week trading sideways. This time the range has narrowed to 120.60/119.60.

The pair lacks drivers to move out of the current corridor. The upside is limited as the Bank of Japan (BOJ) didn’t announce additional monetary stimulus at its October 7th meeting, so yen didn’t weaken. Moreover, the minutes of the Federal Reserve’s September meeting confirmed the central bank’s concerns about the global economic slowdown and the fact it is in no rush to raise interest rates. At the same time, the downside is also limited, because many investors still believe that the BOJ will ease policy further at its October 30th meeting. In addition, despite the weak September nonfarm payrolls (NFP), the expectations of the Fed rate hike this year are still alive.

These are the factors, which are keeping USD/JPY in range. A breakthrough will come only if dollar/yen closes above 121.50 or below 118.50. In our view, the possibility of a breakthrough next week isn’t very high. First of all, Japanese economic calendar looks rather empty. The most important event will be the release of the BOJ meeting minutes on Tuesday, but we don’t think that it will be a market mover. The US will publish several important pieces of data from Wednesday to Friday. These releases can push USD/JPY to the edges of the range, but unless we get some really big surprises they won’t change the market’s overall view on the Fed.

Daily USD/JPY

One thing we should mention, however, that USD/JPY still correlates with the market’s risk sentiment. Risk sentiment will be affected by Chinese economic statistics – trade balance on Tuesday and inflation on Wednesday. As few expect robust figures from China, growth in USD/JPY will likely be limited ahead of these releases. Also note that both in the United States and in Japan there will be bank holidays on Monday, so USD/JPY can make volatile moves on relatively small events like the speeches of the FOMC officials. 

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