UJ downtrend has been confirmed by technicals:
On the downside:
Risks:
- MACD Divergence
- EMA 20 x EMA 50
- Convincing breakout of 108.50 channel low
On the downside:
- Price respects EMA 20 as resistance
- Next critical level is at 100.00, a strong psychological level
- JPY is undervalued against USD from economic fundamentals
- Expectation of monetary divergence between BOJ and Fed may see more unwinding of short JPY positions
Risks:
- Cannot be certain how trade war will affect UJ, most likely flight to quality in favor of JPY
- Trump's expansionary fiscal policy may force Fed to accelerate monetary tightening due to inflation fears, though there's no urgency to "signal" such a move until H2 of 2018 if necessary
- Yellen did a great job not deviating from the game plan - no surprises by FOMC means no second guessing their statements. A 4th hike in 2018 may cause markets to discount future official statements, spark inflation fears, and make a 3 hikes projection in 2019 feel dovish on economic outlook. This is a "Trump" card that Yellen will not play, and hopefully Powell feels the same
- Japanese producers will start to feel the strong JPY eroding on their export profits. There is a chance BOJ may "talk down" JPY closer to 100.00 level (i.e. turn bullish)