The U.S. dollar retreated against its major trading partners following the release of the December Fed Minutes. The majority of members saw upside risk to economic growth forecasts on expectation of more expansionary fiscal policies under Trump administration. They were also split on inflation outlook. Many officials stressed uncertainty on fiscal policy effects.
In their discussion of their economic forecasts, participants emphasized their considerable uncertainty about the timing, size, and composition of any future fiscal and other economic policy initiatives as well as about how those polices might affect aggregate demand and supply.
The USD/JPY daily chart highlights the key consolidation that has taken place since the end of 2016. Key resistance remains the 118.66 high and support lies at the 114.53 level. If price remains in bull market territory as it easily trades above both the 50- and 100-day SMA(s), we could see the 120.00 to 121.70 provide major upside resistance. If the bullish move continues the next key resistance level will be the 125 level. If we see the dollar continue to weaken here, key support will come from the 50-day SMA, which currently trades at the 112.45 level. Major support lies with the psychological 110 handle.
The trade: Buy USD/JPY 114.50, with a stop loss at 113.50 and take profit at 117.50. The risk/reward ratio is 1:3