USD/JPY: Gearing Up For The Next Hike

After a successful short in my article earlier last month, now I believe this pair is ready to make a final thrust to the upside for the fifth wave on the daily. With the “wash and rinse” yesterday, that cleared all the stops, I believe that now market is gearing for the coming FOMC minutes today as well as NFP later Friday.

USD/JPY Charts

FundamentalThe recent BoJ decision to stand pat as widely expected, while pointing to Yen weakness as the primary reason for its growth forecast upgrade, indirectly suggest that the Yen is going to be kept weak for a while. This was evident in the fact that GDP forecast for FY2016 to FY2018 was upgraded higher by 0.2ppt, yet inflation forecast remain unchanged.

On the Dollar front, investors will scrutinized today’s FOMC minutes for clues on the next Feds rate hike. Though Feds plot for a three rate hike, markets are in the opinion of two, given the fact of only one last year compared to three as expressed last year. Furthermore, recent weak GDP report may suggest a later hike than earlier. It will be even more interesting to see what the new President is going to tweet after Fed’s Yellen conference.

USDJPY Charts

The calendar this week is supportive of the greenback, though some nerving comments by President Trump may pose a risk aversion, hence a further slide to the downside.

TechnicalKagi on daily is back to green, suggesting the slide has stopped with closed below 112.50 as the invalidation point. Strong resistance should be expected at all three major handle 116, 117 and 118. If the elliot wave counting is correct and market favors a risk-on in the next few months; plus a clear indication on the next rate hike as US economic data improves in the light of Trump’s fiscal expansion, then 120 is the level to aim.

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