The USD/JPY pair has reached 103.93 on Friday, the highest since October 2008. Weaker-than-expected GDP figures, disappointing current account, manufacturing index, consumer confidence index as well as core machinery orders are all adding more pressure on Shinzo Abe, who tries to revive growth and boost inflation in the world's third largest economy. Nonetheless, the latest data is suggesting that additional stimulus will be required to achieve a long-term prosperity. Some analysts already expressed their views another adjustment to the BoJ's monetary policy will be made in spring. Taking into account tapering fears and great potential for further dovish comments from the BoJ (central bank's press conference is scheduled on Friday, December 20), the USD/JPY can climb to a daily and weekly R2 at 104.42/6.
Taking into account a dark slate of economic calendar this week, we can expect markets to be highly volatile. Hence, the Pound can benefit from BoE's meeting and CPI data that all can support the case of a broadening economic recovery. In this case a move towards 200-hour SMA at 1.6379 can be expected. Additionally, New Zealand economy is likely to gain pace in the third quarter, and post a 3.2% annual growth, up from 2.5% a quarter earlier. Keeping in mind hawkish RBNZ comments, the kiwi has a great potential to appreciate this week.
All these events will most likely be overshadowed by the FOMC meeting on Wednesday, December 18. A survey conducted by Bloomberg showed that 34% of respondents believe Bernanke will start tapering the QE this month, compared with just 17% in November. Payrolls improved, the jobless rate fell to 7.0% in November, while second estimates of Q3 growth was revised to 3.6%. Other sectors are also speaking in favour of economic strengthening.