A range of macroevents and data this week could spark the pair’s climb. The key event that will potentially be the biggest mover is the last Federal Open Market Committee (FOMC) meeting for the year (Thursday 3am Singapore time).
Speculation is high that the FOMC will change its constantly used phrase of ‘considerable time’ in describing how long it will keep interest rates low. Any hawkish cues will likely be a huge lift for USD/JPY pair.
There are certainly more fundamentals to support the hawkish view. Last night, the US industrial production numbers showed a print of 1.3%, better than the consensus forecast of 0.7% and the previous reading of 0.1%.
Recent figures showing an improved outlook for personal consumption and relatively steady job data will also lend support for an earlier rate hike.
Another factor driving the USD/JPY pair higher is the weakness in the Japanese currency, especially coming off the weekend’s landslide election, won by Prime Minister Shinzo Abe’s party as a mandate for ‘Abenomics’.
Japanese macrodata this week could also put more pressure on the yen, if they come in disappointing. Tomorrow’s trade balance data (7.50am Singapore Time) is expected to show the trade deficit widen from 710 billion yen to 992 billion yen, dragged down by lower exports.
On a four-hour chart, USD/JPY looks to be testing its support at around 117.24 points, after pulling back from 121.91 points last week. The 119.00 point level will be the next ceiling to watch out for.