The US dollar continues to hammer the yen, as USD/JPY jumped 260 points last week. The pair closed at 121.14, marking a 6-week high. The upcoming week has eight events. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
The Federal Reserve was dovish in its January policy statement, lowering the chances of a hike in March, and US durables looked dismal last week. The BOJ shocked the markets by adopting negative interest rates. This sent the yen tumbling late in the week.
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USD/JPY graph with support and resistance lines on it:
- Final Manufacturing PMI: Monday, 2:00. Japanese Trade Balance improved to 0.00 trillion yen in November, breaking a long streak of deficits. Will we see a surplus in December? The markets appear to think so, with an estimate of 0.08 trillion yen.
- Monetary Base: Monday, 23:50. SPPI measures inflation in the corporate sector. The index dipped to 0.2% in November, short of the estimate of 0.4%. The estimate for December is 0.2%.
- 10-year Bond Auction: Tuesday, 3:45. Retail Sales is the primary gauge of consumer spending, and an unexpected reading can have a strong impact on the movement of USD/JPY. The indicator slipped 1.0% in November, its second decline in three readings. The forecast for the December report is 0.2%.
- BOJ Governor Haruhiko Kuroda Speaks: Wednesday, 4:30. This important consumer indicator continues to struggle, and has posted just one gain in the second half of 2015. The November reading dipped to -2.9%, well below the forecast of -2.1%. Another decline is expected, with an estimate of -2.3%.
- Consumer Confidence: Wednesday, 5:00. Tokyo Core is the most important Japanese inflation indicator, and is closely watched by the markets. The index posted a small gain of 0.1% in December, matching expectations. Another gain of 0.1% is predicted for the January report.
- Leading Indicators: Friday, 5:00. The indicator came in at -1.0% in November, compared to the forecast of -0.4%. Another decline is expected in December, with an estimate of -0.3%.
* All times are GMT
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
USD/JPY Technical Analysis
USD/JPY opened the week at 118.65 and quickly touched a low of 117.65. The pair then reversed directions and climbed all the way to 121.69, testing resistance at 121.50. USD/JPY closed the week at 121.14.
Technical lines from top to bottom:
With the pair posting strong gains last week, we start at higher levels:
We start with resistance at 125.28.
123.75 was a cap in November.
122.49 is next.
121.50 marked the high point of a yen rally in December which saw USD/JPY drop to the 117 line. It was tested last week.
120.47 has switched to a support role following strong gains by the pair.
119.19 was easily breached as the yen posted sharp losses last week.
118.50 has strengthened in support.
116.90 supported dollar/yen early in 2015. It is the final support line for now.
I am bullish on USD/JPY
The BoJ surprised the markets by cutting rates into negative territory, in an attempt to kick-start the weak Japanese economy. The yen took a beating late in the week and this trend could continue. As expected, the Federal Reserve did not raise rates last week, so the markets will be looking for clues regarding a rate hike in March.
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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 the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the kiwi, see the NZDUSD forecast.
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