January 29, 2018

FXTM, "USDJPY Market Forecast for Q1 2018" Investors focusing on Rate Hike, Geopolitical tensions and more

Range bound as bulls and bears clash.

It was certainly a dull final trading quarter for the USDJPY as conflicting market themes invited both bulls and bears to attack. The mixture of escalating geopolitical tensions and political risk sparked risk aversion, consequently supporting the safe-haven Yen.

This article is originally referred from FXTM Market Forecast Q1 2018.

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On the other side of the equation, elevated global equity markets and growing optimism over the global economy, stimulated risk appetite; ultimately capping the Japanese Yen’s upside potential.

This resulted in the currency pair wandering within a modest range for the most part of Q4, with resistance found at 114.50 and support at 111.00.

USDJPY Daily Price Chart
USDJPY Weekly Price Chart
USDJPY Monthly Price Chart

As the first quarter of 2018 gets underway, the trajectory of the USDJPY is likely to be driven by the value of the Dollar, Fed rate hike expectations, and geopolitical developments.

Although sentiment continues to improve towards the Japanese economy amid improving economic growth, the Bank of Japan is expected to leave monetary policy unchanged, thanks to stubbornly low inflation.

If the bullish sentiment towards the US economy is able to elevate the Dollar, and expectations heighten over the Federal Reserve raising US interest rates more than three times this year, then the USDJPY may venture higher.

In an alternative scenario, if a situation arises where tensions heighten between the US and North Korea and geopolitical risk mounts across the globe, it could provide ample support for the Yen– ultimately dragging the currency pair lower.

Another alternative scenario could be a surprise from the BoJ, where some of the central bank members are considering tightening policy.

Technical Analysis on USDJPY

From a technical perspective, the USDJPY remains trapped in a wide range on the daily and weekly charts, with resistance found at 114.40 and support at 110.75.

On the daily charts, the 113.20 continues to act as a pivotal level of interest which could play a role in where the currency pair trades. Lagging indicators such as the MACD remain flat, while the momentum suggests the USDJPY is struggling for any real direction the daily charts.

A breakout out above 113.20 could open a path higher towards 114.40, alternatively a breakdown may trigger a selloff back to the 112.00 support level.

On the monthly charts, until the USDJPY is able to secure a solid monthly close above 115.40, the currency pair still remains at risk of experiencing heavy pullbacks on the monthly charts.

Bulls need to break above 115.40 for the USDJPY to appreciate higher towards 118.50.

In an alternative scenario, a weekly close back below 120.00, could inspire bears to challenge the 108.00 support level.

Original Source: FXTM Market Forecast Q1 2018

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