USD/JPY Fundamental Analysis: November 25, 2016
The USD had already hit its highest levels in eight months against the JPY after investors are still making adjustments to higher interest rates in the US, a booming economic market and market speculations that Donald Trump’s fiscal policies will cause inflation to surge, prompting the Federal Reserve to have interest rate hikes on a much frequent basis this coming 2017.
The increase in interest rates are expected to help in increasing the gap between the interest rate differentials of the US Treasury Bonds and Japanese Government Bonds, therefore making the USD more appealing for investors.
The USD/JPY pair closed down the previous trading session at 113.313 after increasing by +0.73% or 0.822 points. Thursday was a bank holiday for the US, and volumes clocked in at below average rates. This muted market volume is expected to be sustained until Friday since a lot of the major market players are not yet expected to return to the market until next week.
Since the USD/JPY pair closed off the Thursday session on a highly positive note, the currency pair is expected to continue its increase up until Friday. However, selling pressure could be limited since US banks are expected to remain spectators as of the moment.
For economic releases from Japan, the Tokyo Core CPI is expected to clock in at -0.4%, the same as last month’s data. Meanwhile, the National Core CPI is expected to come in at -0.4%, which is slightly lower than its previous reading of -0.5%. SSPI data is expected to remain at 0.3%, while the Bank of Japan Core CPI is expected to experience a slight increase of 0.3% as compared to last month’s reading of 0.2%. Major economic releases from the US include the Goods Trade Balance data, Flash Services PMI, and Preliminary Wholesale Inventories.