Fundamental view:

The US dollar edged high against the Japanese yen this week. The Federal bank monetary policy announcement strengthened the US dollar. The Central bank has left the rate unchanged however he also made a notable change of tone toward the hawkish side. The major market mover was Fed Chair noting that he will not rule out rate increase at every meeting this year. He also opened the door to 50bp rate hikes rather than standard 25bp. On the economy front, Powell said “quite a bit of room to raise rates without hurting employment” and stressed that sustaining a long economic expansion means price stability. That is different than the previous focus on employment.

On the other hand, The BOJ will not tighten policy in future. If anything, another spending package can be expected from Prime Minister Fumio Kishida’s government which is pointless but by now, traditional endeavor for a new leader.

In this week, BoJ Summary of Opinions on 26^th January and US Pending Home Sales monthly report on 27^th January favored bearish trend whereas Japan Markit Services PMI on 24^th January, FOMC press conference on 26^th January and US GDP quarterly report on 27^th January favored bullish trend.

The major economic events deciding the movement of the pair in the next week are  Japan Unemployment Rate at Jan 31, Japan Markit Manufacturing PMI , US ISM Manufacturing PMI at Feb 01, US ADP Nonfarm Employment Change, EIA Crude Oil Stocks Change at Feb 02, Initial Jobless Claims, US ISM Non-Manufacturing PMI at Feb 03 and US Nonfarm Payrolls at Feb 04. 

USD/JPY Weekly outlook:

Technical View:

Last week’s high was 0.54% higher than the previous week. Maintaining high at 115.68 and low at 113.47 showed a movement of 221 pips.

In the upcoming week we expect USD/JPY to show a bullish trend. The currency pair is trading above the 200 Simple Moving Average and the MACD trades to the upside. A solid breakout above 116.16 may open a clean path towards 117.02 and may take a way up to 118.37. Should 113.95 prove to be unreliable support, the USDJPY may sink downwards 112.60 and 111.74 respectively. In H4 chart, Formation of rounding bottom pattern indicates reversal of the trend creating prospects of a bullish trend Along with a bullish engulfing formation braces our expectation.