USD/JPY 2019 Forecast - 14 December 2018

The US dollar has been rising against the Japanese yen for the entirety of 2018, in a clearly defined upward channel. Since then, we have tested the ¥115 level, an area that has continues to offer major resistance. In fact, that resistance goes back to March 2016, so it of course has a certain amount of importance attached to it.

I suspect at this point we will continue to struggle to get above the ¥115 level, and we may even need to break down rather significantly during the year. I anticipate that with the shrinking GDP figures coming out of Japan, this market is going to be looking at one major thing, the Federal Reserve. Currently, there are a lot of people who are debating whether there are going to be three interest rate hikes in the United States during the year of 2019, and I think that’s still up in the air.

At this point, the Federal Reserve is starting to soften its tone and talking about being more “data dependent.” I think we very well could find the market breaking below the up trending channel, and possibly even below the crucial ¥111.50 level. However, if we do get that pullback I think it is only a matter of time before the buyers come back. Why is this? Because the Bank of Japan will almost certainly have to continue to stay ultra-loose with its monetary policy. I think we may get an initial pullback, perhaps even lasting a few months before the buyers come back.

The alternate scenario is that the Federal Reserve goes ahead with the interest rate hikes, and we will eventually break above the ¥115 level. If we do at this point, I think the target would be ¥118, followed by the crucial ¥120 level. I suspect this is going to be one of the more difficult pairs to trade this year.


Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.