USD/JPY poised for a third consecutive annual gain on the back of Fed speculation

US dollar was set to register a third year of gains in a row against the Japanese yen, driven by speculations that the Federal Reserve Bank will probably introduce a rate hike in 2015, while the Bank of Japan will probably ease policy further.

At 15:14 GMT today USD/JPY was losing 0.02% on a daily basis to trade at 119.45, but was poised for a bit over 13% increase for the whole year. The pair recorded a daily high at 119.79 during early European trade and a daily low at 119.25 during the Asian session. On December 8th USD/JPY touched its highest level since July 2007, hitting 121.86.

Yesterday’s trade saw USD/JPY within the range of 118.84-120.71. The currency pair closed at 119.48, losing 0.99% on a daily basis.

Divergent policies

“The dollar has had an extremely good year,” said Mark McCormick, a foreign-exchange strategist at Credit Agricole SA in New York, cited by Bloomberg. “It’s been driven primarily by outside forces and I think what we’ll see in 2015 is, we’ll see U.S. forces start to drive the dollar, which means the Fed will probably begin normalizing policy.”

Market players see a 71% probability that the Federal Reserve will probably raise its benchmark interest rate to at least 0.5% by October 2015, according to futures contracts data. At the same time, global markets expect that the Bank of Japan will introduce additional stimulus measures next year, which tend to pressure longer-term interest rates and devalue the national currency.

According to the median forecast of economists and strategists, participated in a Bloomberg survey, USD/JPY will probably appreciate towards the 125 level during the upcoming year.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 119.68. In case USD/JPY manages to breach the first resistance level at 120.51, it will probably continue up to test 121.55. In case the second key resistance is broken, the pair will probably attempt to advance to 122.38.

If USD/JPY manages to breach the first key support at 118.64, it will probably continue to slide and test 117.81. With this second key support broken, the movement to the downside will probably continue to 116.77.

The mid-Pivot levels for today are as follows: M1 – 117.29, M2 – 118.23, M3 – 119.16, M4 – 120.10, M5 – 121.03, M6 – 121.97.

In weekly terms, the central pivot point is at 120.17. The three key resistance levels are as follows: R1 – 121.03, R2 – 121.69, R3 – 122.55. The three key support levels are: S1 – 119.51, S2 – 118.65, S3 – 117.99.