Category: USD JPY Forecast

USD/JPY Forecast Oct. 27-31



The Japanese yen reversed directions last week, as USD/JPY gained about  100 points. This week’s highlights include Retail Sales, Tokyo Core CPI and the Bank of Japan Monetary Policy Statement. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

In the US data was generally positive last week, with inflation meeting expectations. Although Unemployment Claims rose, the 4-week average continues to point to stronger job numbers. However, New Homes Sales slumped in September. In Japan, the trade deficit was larger than expected.

Updates:

USD/JPY graph with support and resistance lines on it:

USDCADForecast Oct27-31

  1. SPPI: Sunday, 23:50. The Services Producer Price Index looks at changes in inflation in the corporate sector. The index has looked robust in recent readings and posted a strong gain of 3.5% last month. The markets are anticipating an identical reading for September. 
  2. Retail Sales: Monday, 23:50. Retail Sales is the primary gauge of consumer spending and should be treated as a market-mover. The indicator has rebounded with two straight gains, and the September release stands at 0.9%.
  3. Preliminary Industrial Production: Tuesday, 23:50. This manufacturing indicator disappointed last month, posting a decline of -1.5%. This was well off the estimate of 0.2%. The markets are expecting a strong turnaround in the upcoming release, with the forecast standing at +2.3%.
  4. Household Spending: Thursday, 23:30. This is an important indicator of consumer spending. The indicator has not shown a gain since April and posted a decline of 4.7% last month. The markets are expecting another decline in September, with an estimate of -4.0%.
  5. Tokyo Core CPI: Thursday, 23:30. This is the most important indicator of consumer inflation and an unexpected reading can affect the movement of USD/JPY. The index has been steady, with a reading of 2.6% in August. The forecast for the upcoming reading stands at 2.5%.
  6. BoJ Monetary Policy Statement: Friday, Tentative. The BoJ will release its monetary policy statement, with the markets expecting the central bank to maintain its monetary stance. The statement will be followed with a press conference.
  7. Housing Starts: Friday, 5:00. Housing Starts continue to decline, pointing to contraction in the housing sector. In the previous release, the indicator dropped 12.5% and the estimate for the upcoming reading stands at -17.1%.
  8. BoJ Outlook Report: Friday, 6:00. This report is published on a semi-annual basis and the markets will be listening closely for hints as to future monetary policy.

* All times are GMT

USD/JPY Technical Analysis

Dollar/yen started the week at 107.16. The pair dipped to 106.25 but then reversed directions and climbed to a high of 108.35, as resistance held firm at 108.58 (discussed last week). USD/JPY closed the week at 108.15.

Live chart of USD/JPY:


Technical lines from top to bottom:

112.48 marked the start of a yen rally in January 2008, which saw USD/JPY drop below the 100 level.

110.68 represented a high point of a strong dollar rally in August 2008, which started around the key 100 level.

108.58 continues in a resistance role.

106.88 has provided support since mid-September. The pair broke below this line, but it recovered as the yen dropped sharply late in the week.

105.44 had held firm since December.

104.92 capped the pair around the turn of the year.

104.25 was an important resistance line back in August.

103.55 is the final support line for now. This line marked the low point of the recent dollar rally, which saw USD/JPY push above the 110 line in the first week of October.

I am bullish on USD/JPY

The outlook for the US economy remains positive, and  if GDP for Q3 meets expectations, the US dollar should have a good week. As well, the Fed is likely to wrap up QE, which should put the markets in a positive mood about the US dollar, as the focus shifts to the timing of a rate hike which is widely expected in 2015.

In our latest podcast, we preview the all important Fed decision, digest China and examine bitcoin against gold:

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Download it directly here.

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Further reading:

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