Inflationary pressures in the US are expected to have risen further in December, as measured by the CPI. Forex traders will start to pay closer attention to inflation as it moved above 2.0% annualized, the Fed’s inflation target. This comes at a time of a slowing economy and could pose a greater threat as the year unfolds. The USDJPY moved into its horizontal resistance area, but momentum is decreasing. How will price action react to the release of US data? Subscribe to the PaxForex Daily Fundamental Analysis and grow your balance trade-by-trade.
The Japanese economy continues to struggle. Bank lending weakened as the trade balance posted a surprise deficit in December. A current account surplus was unable to mask weakness in global trade. China reported a very strong trade report for December, but the overall trend suggests more weakness ahead. Will bears force a breakdown in the USDJPY this week, or can bulls keep the rally alive? Today’s fundamental analysis will take a look at the upside potential as well as the downside risk in this currency pair.
Here are the key factors to keep in mind today for US Dollar trades:
- US NFIB Small Business Optimism Index: The US NFIB Small Business Optimism Index for December is predicted at 104.9. Forex traders can compare this to the NFIB Small Business Optimism Index for November, which was reported at 104.7.
- US CPI: The US CPI for December is predicted to increase by 0.3% monthly and by 2.4% annualized. Forex traders can compare this to the US CPI for November, which increased by 0.3% monthly and by 2.1% annualized. The US Core CPI for December is predicted to increase by 0.2% monthly and by 2.3% annualized. Forex traders can compare this to the US Core CPI for November, which increased by 0.2% monthly by 2.3% annualized.
- US IBD/TIPP Economic Optimism Index: The US IBD/TIPP Economic Optimism Index for December is predicted at 57.3. Forex traders can compare this to the US IBD/TIPP Economic Optimism Index for November, which was reported at 57.0.
- US Monthly Budget Statement: The US Monthly Budget Statement for December is predicted at -$15.0B. Forex traders can compare this to the US Monthly Budget Statement for November, which was reported at -$209.0B.
Here are the key factors to keep in mind today for Japanese Yen trades:
- Japanese Bank Lending: Japanese Bank Lending including Trusts for December increased by 1.8% annualized and Japanese Bank Lending excluding Trusts increased by 1.9% annualized. Forex traders can compare this to Japanese Bank Lending including Trusts for November, which increased by 2.1% annualized and to Japanese Bank Lending excluding Trusts, which increased by 2.2% annualized.
- Japanese Current Account Balance and Trade Balance: The Preliminary Japanese Current Account Balance for November was reported at ¥1,436.8B. Economists predicted a figure of ¥1,424.8B. Forex traders can compare this to the Japanese Current Account Balance for October, which was reported at ¥1,816.8B. The Preliminary Japanese Adjusted Current Account Balance for November was reported at ¥1,794.9B. Economists predicted a figure of ¥1,786.2B. Forex traders can compare this to the Japanese Adjusted Current Account Balance for October, which was reported at ¥1,732.2B. The Preliminary Japanese Trade Balance for November was reported at -¥2.5B. Economists predicted a figure of ¥103.8B. Forex traders can compare this to the Japanese Trade Balance for October, which was reported at ¥254.0B.
- Japanese Bankruptcies: Japanese Bankruptcies for December increased by 13.20% annualized. Forex traders can compare this to Japanese Bankruptcies for November, which increased by 1.40% annualized.
- Japanese Eco Watchers Survey: The Japanese Eco Watchers Survey Current Index for December was reported at 39.8 and the Japanese Eco Watchers Survey Outlook Index was reported at 45.4. Economists predicted a figure of 40.9 and 46.8. Forex traders can compare this to the Japanese Eco Watchers Survey Current Index for November, which was reported at 39.4 and to the Japanese Eco Watchers Survey Outlook Index, which was reported at 45.7.
Should price action for the USDJPY remain inside the or breakdown below the 109.700 to 110.200 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 110.000
- Take Profit Zone: 107.650 – 108.200
- Stop Loss Level: 110.650
Should price action for the USDJPY breakout above 110.200 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 110.650
- Take Profit Zone: 111.800 – 112.400
- Stop Loss Level: 110.200
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