1Finance

The new year starts with the U.S. Federal Reserve on a path toward raising interest rates sometime between April and June. The Bank of Japan is committed to keeping interest rates low in order to weaken the Yen and attract fresh export business. On paper, there doesn’t appear to be anything in the works that could derail the USD/JPY rally.

The strength of the U.S. Dollar over the Japanese Yen should continue throughout 2015 simply because the interest rate differential favors the Greenback. Overbought conditions could trigger profit-taking breaks, but for the most part, the pressure should be to the upside.



Any surprises with the U.S. economy that could encourage the Fed to back away from or delay an interest rate hike could also lead to weakness. However, this is likely to show up in the U.S. economic reports especially the labor market statistics and inflation data. As long as the U.S. continues to add jobs each month, the Fed should remain on a path toward an interest rate like by mid-year or even sooner.

A stock market sell-off could also encourage Japanese investors to repatriate their money. This may also cause a minor glitch in the solid uptrend, but at this time, the trend doesn’t appear to be in any danger of changing. In addition, if the market gets “too” bullish or gets hit with periods of excessive volatility, the BoJ may intervene to calm things down, but the chances of this occurring are pretty remote at this time.

Technically, the USD/JPY closed the year in an uptrend and straddling a major Fibonacci level at 120.11. Overtaking this level with conviction and sustaining the move could lead to a test of the June 2007 top at 124.13 this month.

A failure to overtake 120.11 will indicate investor indecision which could trigger a break back to the nearest uptrending support angle at 116.82.

The tone of the market this month will be determined by trader reaction to 120.11. The tone of the market for 2015 will be determined by investor reaction to 119.825. Keep this price on your charts all year.

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