USDJPY Weekly Forex Forecast – 17th to 21st Dec 2018
Fundamentals Outlook
The week ahead is expected to remain slow with only second tier data coming out. The week starts off with the flash inflation estimates from the Eurozone. The inflation data covers the month of November. Inflation data comes amid concerns that consumer prices are rising at a slower pace in the Eurozone. The only big event next week is the Fed’s monetary policy meeting. The short term fed funds rate are expected to rise by a quarter point, bringing the U.S. interest rates to 2.25% – 2.50%. This will be the last rate hike this year.
Officials will also be releasing their projections on the economy and interest rate projections for the next year. Following the Fed meeting, the Bank of Japan will be holding its monetary policy meeting. No changes are expected as the BoJ is widely expected to remain muted as it buys for more time for inflation to rise higher. On the economic front, the final revised GDP estimates for the third quarter will be released later on Friday. Investors expect to see no change to the third quarter GDP which is expected to remain steady at 3.5% on the quarter.
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Chart set up: The USDJPY currency pair was seen retesting the resistance level of 113.65 once again. Price action has failed to break past this resistance level and resulted in a pullback in price. However, the reversal off the resistance level is starting to point to an inverse head and shoulders pattern that could result in an upside breakout.
Key support/resistance levels:
Support: 111.78; Resistance: 113.65
Commentary:
While the USDJPY maintains its range within 113.65 and 112.74 price action could eventually break past the resistance level to the upside. Watch for the right shoulder to be formed in the USDJPY for an inverse head and shoulders pattern. The reversal off the right shoulder will require the USDJPY to break past the neckline resistance at 113.65. If this is validated, the USDJPY will be targeting 114.52 level. Alternately, failure to validate the inverse head and shoulders pattern could result in the U.S. dollar slipping back to the support at 112.74. For the week ahead, the USDJPY currency pair is expected to be bullish.
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