USD/JPY climbed sharply last week, posting gains of almost 300 points. The pair closed the week at 121.49, its highest level since July 2007. The upcoming week has 10 events. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
In the US, Non-Farm Payrolls report was outstanding with a 321K job gain in November and finally a bump in wages. As well, ISM Non-Manufacturing PMI posted a three-month high. In Japan, Average Cash Earnings fell short of expectations.
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY graph with support and resistance lines on it:
- Current Account: Sunday, 23:50. This indicator is closely linked to currency demand, as an increased surplus indicates that foreigners are buying more yen to purchase Japanese goods and services. The surplus jumped to JPY 0.41 trillion in October, compared to just 0.13 trillion a month earlier. This easily beat the estimate of 0.03 trillion. Another strong reading is expected in November, with an estimate of JPY 0.46 trillion.
- Final GDP: Sunday, 23:50. GDP slipped by 1.8% in Q2, marking the first decline in seven quarters. A very small decline is expected in Q3, with an estimate of -0.1%
- Economy Watchers Sentiment: Monday, 5:00. The indicator has posted just one reading above 50 since March, pointing to ongoing contraction. Little change is expected in the November reading, with an estimate of 45.9 points.
- M2 Money Stock: Monday, 23:50. This is a minor event, as much of the data was released in last week’s Monetary Base report. The markets are expecting a repeat of last month’s gain of 3.2%.
- 30 year-Bond Auction: Tuesday, 3:45. Yields on 30-year bonds have been decreasing and this trend continued last month, as yields slipped to 1.48%. Will the downward trend continue in the upcoming release?
- Preliminary Machine Tool Orders: Tuesday, 6:00. The indicator has softened for three straight readings, with the October reading coming in at 31.2%. The markets are hoping that the downward move will be reversed in the upcoming release.
- BSI Manufacturing Index: Tuesday, 23:50. This important indicator is based on a survey of large manufacturers. The indicator bounced in Q2 with a strong gain of 12.7 points, surprising the markets which had forecast an estimate of -10.3. The estimate for the Q3 reading stands at 10.7 points.
- Consumer Confidence: Wednesday, 5:00. This indicator is on a slight downturn and came in at 38.9 points in the previous reading. The markets are expecting a slight improvement, with the estimate for the upcoming release standing at 39.6 points.
- Core Machinery Orders: Wednesday, 23:50. Core Machinery Orders tends to show strong movement, making accurate estimates a tricky task. In September, the indicator jumped 2.9%, compared to the estimate of -1.0%. The markets are expecting a significant downturn in October, with an estimate 0f -1.7%.
- Tertiary Industry Activity: Wednesday, 23:50. This indicator is an important gauge of activity in the manufacturing sector. The September reading posted a gain of 1.0%, marking a six-month high. The estimate for the upcoming release stands at -0.1%.
- Revised Industrial Production: Friday, 4:30. The week wraps up with this minor manufacturing event. In September, the indicator posted a strong gain of 2.9%, slightly above the estimate. The markets are bracing for a weak gain of 0.2% in October.
* All times are GMT
USD/JPY Technical Analysis
Dollar/yen started the week at 118.66. The pair touched a low of 117.87, testing support at 117.94 (discussed last week). USD/JPY then posted strong gains and climbed to a high of 121.68. The pair closed the week at 121.49.
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
Technical lines from top to bottom:
With USD/JPY showing strong gains, we start at higher levels:
126.59 marked the high point of a dollar rally back in April 2001.
124.16 marked the start of a yen rally in June 2007, which saw USD/JPY drop to the 96 level.
122.19 has weakened after last week sharp losses by the yen. This line has held firm since July 2007. The next resistance line is 121.39.
119.88 is the last barrier before the psychologically important 120 line.
117.94 was tested early in the week as the pair briefly lost ground, but starts the new week as a strong support level.
116.82 is the final support line for now.
I am bullish on USD/JPY
US employment data stole the show last week, posting an excellent jobs report and some wage inflation as well. This should help ease concerns about whether the Fed remains on track for a rate hike in the first half of 2014. In Japan, the recent BoJ move to increase monetary stimulus as well as the uncertainty due the upcoming election, continue to weigh heavily on the hapless yen.
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Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
- For the kiwi, see the NZDUSD forecast.