Currency Analyst since 2010

USD/JPY: forecast for December 7-13

By Elizabeth Belugina

USD/JPY spent most of the week consolidating in the 123.60/122.20 area.

Next week the most important day in Japan’s economic calendar will be Tuesday: the nation will release current account and final Q3 GDP figures. There will also be  a speech of the Bank of Japan’s Governor Kuroda, though the central bank is unlikely to deviate from its current approach of keeping the amount of monetary stimulus unchanged.

The main driver of USD/JPY will continue to be the US dollar and the news from America. Here the main releases will be on Friday (retail sales, PPI). US employment left the door open for the Federal Reserve’s rate hike on December 16. The Fed’s Chair Janet Yellen warned against waiting to raise rates. At the same time, we expect that the US central bank will try to make rate increases as gentle as possible, so the main scenario is that the US dollar won’t have enough strength to continue its ascent against Japanese currency. In the 124.00 area and higher we will likely see Japanese companies selling US dollars. The pair has support at 121.50. A decline below this level will open the way down to 120.00. Still, for the longer term the uptrend support above 119.00 should remain in place taking into account the divergence in policy of the US and Japanese central banks.

Another thing, which will have an impact on USD/JPY fluctuations, in the coming week is the market’s risk sentiment. Watch Chinese trade data on Tuesday and inflation figures on Wednesday. Weaker readings will affect the pair, while better readings will be positive.

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