USD/JPY rose from the lows approaching the well known 102 line once again in a week that saw lots of dollar strength. Will it pick a direction now? Consumer related figures such as retail sales and household spending stand out Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
In Japan, inflation numbers came out more than expected and speculation about the BOJ’s next moves “stole the show”: it seems that the economic improvement is not moving fast enough for investors. With the government seeming unable to introduce new reforms, the BOJ could come in handy and lend a helping hand. In the US, most data has been good, supporting a stronger US dollar. Will this continue? Let’s start:
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY graph with support and resistance lines on it. Click to enlarge:
- Household Spending: Monday, 23:30. The level of consumption is another measure of economic growth and is naturally related to inflation. After a second surprising drop in May (one month after the tax hike), another drop of 3.7% is expected, but a bounce cannot be ruled out.
- Unemployment Rate: Monday, 23:30. Japan enjoys one of the lowest levels of unemployment in the Western world: 3.5%. A similar number is expected now. It has a low impact due to the focus that the BOJ has on inflation.
- Retail Sales: Monday, 23:50. The volume of sales has stabilized in May (-0.4%) after a big and expected drop in April (4.3%) that is related to the tax hike. Year over year, sales are expected to slide by another 0.4%.
- Industrial Production: Tuesday, 23:50. The story is similar in industrial production: after a plunge of 2.8% in April, we have seen a rise of 0.5% in May. The see-saw is likely to continue with a drop of 1% predicted now.
- Average Cash Earnings: Thursday, 1:30. The value of cash earnings is a combination of jobs and employment. Wages are basically behind core inflation, making this figure very important. Earnings have been encouraging in the past 3 months, with rises of 0.7%-0.8% year over year. The BOJ and the government would certainly like to see it climb above 1% and potentially meet the 2% inflation target. A stronger rise is expected for June: 0.7%.
- Housing Starts: Thursday, 5:00. This housing figure tends to be volatile. After a crash of 15% in May, another free-fall number is expected on the yearly basis: 11.2%.
- Final Manufacturing PMI: Friday, 1:35. Markit’s manufacturing PMI is gaining traction for Japan. After a few negative months, the indicator rose above the 50 point mark three months ago. A confirmation of the 50.8 figure is likely now.
* All times are GMT
USD/JPY Technical Analysis
Dollar/yen started the week with a rise from the lows, but it initially met resistance at 101.60 (mentioned last week). It then managed to break this level, but bounced off the 102 level.
Live chart of USD/JPY:
[do action=”tradingviews” pair=”USDJPY” interval=”60″/]Technical lines from top to bottom
104.80 capped the pair during January and with current ranges, looks distant. 104.10, the high of April 2014 is currently a minor line, but should be watched.
Below, 103.77 provided support for the pair in January and served as a clear separator of ranges. 102.80 was a stubborn peak during February and is the top line of the current trading range.
In the narrower range, 102.30 is weak resistance. 102.00 is a round number that supported the pair several times and is now the pivotal line within the narrowing trading range. 101.60 is weak support in the narrower range.
101.20 provided strong support for the pair during May 2014 and is the low line of support. 100.75 prevented the pair from falling lower during February and is the last backstop before the round number of 100.
100 is not just a round number but also worked as resistance several times in the past.
I remain bullish on USD/JPY
As we’ve seen, the worsening of the geo-political tensions could not stop the pair from rising back towards the 102 level. Yet it seems there is more potential for rises: weakness in Japanese economic numbers together with improving US ones could push the pair higher, even if tensions continue in Ukraine and in the Middle East.
More yen: GBPJPY: 173.80 Viewed as Important Resistance
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.
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