Japanese Yen Talking Points
USD/JPY continues to mark fresh monthly highs, with the exchange rate now at risk of making a run at the December-high (113.75) as the bullish momentum appears to be gathering pace.
USD/JPY Rate Forecast: December-High on the Radar
The reaction to the semi-annual Humphrey-Hawkins testimony[1] keeps the topside targets on the radar for USD/JPY as the central bank appears to be on course to further normalize monetary policy in 2018, and fresh data prints coming out of the U.S. economy may encourage the Federal Open Market Committee (FOMC) to strike a hawkish tone at the next interest rate decision on August 1 as the Philadelphia Fed Business Confidence survey shows a meaningful improvement in July, with the gauge bouncing back to 25.7 from 19.9 the month prior.
It seems as though the threat of a trade war[2] will not be enough to deter the FOMC[3] from its hiking-cycle as the central bank largely achieves its dual mandate for price stability and full-employment, and Fed Fund Futures may continue to reflect growing expectations for four rate-hikes in 2018 as Chairman Jerome Powell & Co. warn that ‘it would likely be appropriate to continue gradually raising the target range for the federal funds rate to a setting that was at or somewhat above their estimates of its longer-run level by 2019 or 2020.’
As a result, the less-accommodative stance in the U.S. keeps the broader outlook for USD/JPY tilted to the topside, and the dollar-yen[4] exchange rate may ultimately stage a run at the December-high (113.75) as long as the Relative Strength Index (RSI) sits in overbought territory.
USD/JPY Daily Chart
