Yahoo Finance USD/JPY Fundamental Daily Forecast – Pressured by Decreased Appetite for Risky Assets
Weaker global equity markets are helping to drive the Dollar/Yen lower early Wednesday in a continuation of the selling pressure which started on Monday. Traders are reacting to increased volatility in the stock markets, led by three consecutive lower closes in the S&P 500 Index.
At 0556 GMT, the USD/JPY is trading 112.088, down 0.492 or 0.44%.
Early Wednesday, Asia markets are being pressured, followed by overnight declines in the U.S. stock market. All three major U.S. indexes finished lower with the benchmark S&P 500 Index posting its first three-day losing streak since August.
Japan’s Nikkei 225 declined 1.59 percent while the Topix index was down 1.2 percent. Across the Korean Strait, the Kospi fell 0.61 percent.
In Hong Kong, the Hang Seng index traded down 1.27 percent. Chinese mainland markets were also lower, with the Shanghai Composite down 0.6 percent and the Shenzhen Composite off by 0.27 percent.
In economic news, early Tuesday, Japanese Consumer Confidence came in at 44.9, slightly better than the estimate. Bank of Japan Core CPI came in at 0.5% as expected.
The U.S. trade deficit widened in October to a nine-month high on record imports that reflect steady domestic demand, the Commerce Department reported on Tuesday. U.S. non-manufacturing economic activity slipped more than anticipated in November after a surprise expansion in the previous month. The Institute of Supply Management’s survey of non-manufacturing firms declined to 57.4 in November, more than the 59.2 forecast. In October, the ISM Non-Manufacturing PMI was 60.1.
Forecast
The Japanese Yen may be getting a little boost from concerns about a possible U.S. government shutdown. This may be helping to offset optimism about progress on tax reform legislation. Risk averse investors, worried about a government shutdown, are saying that the Democrats may be trying to take advantage of a battle within the Republican Party over keeping the government open.
Although USD/JPY traders are closely tracking the progress made by U.S. lawmakers to pass a bill that will overhaul the American tax system, they also appear to remain cautious in view of further uncertainties over the outcome of the Brexit talks and Friday’s partial U.S. government shutdown should negotiations fail.
The USD/JPY chart pattern is also starting to look weak which may be the first sign that risk is coming. Monday’s rally stopped inside a key retracement zone at 112.782 to 113.241 and the Forex pair formed a potentially bearish closing price reversal top. This is the chart pattern fueling today’s early weakness.
The first downside target zone today is 111.960 to 111.694. We could see a technical bounce on the first test of this zone, but if it fails, this week’s high at 113.083 will become a secondary lower top. This will be a strong indication that the selling is greater than the buying at current price levels.
This article was originally posted on FX Empire
