USD/JPY dropped within the range as fear took some hold on the markets. The strengthening of the dollar was outweighed by the advance of the yen . The rate decision is the main event of the week. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
Japanese figures haven’t been that great: Core machinery orders plunged by 19.5% in May, much worse than expected. This also contributed to the fear factory. Another disappointment came from the tertiary industry activity that rose by only 0.9%. In the US, we heard some hawkish sounds around the Fed, and also the data looked positive, but this was not enough for the greenback against the yen.
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY graph with support and resistance lines on it. Click to enlarge:
- Industrial Production: Monday, 4:30. This is the revised version of the industrial output. The initial report was of a rise of 0.5% and this will probably be confirmed now. The rise is a rebound after the plunge in the previous month.
- Rate decision: Tuesday morning. The Bank of Japan was initially thought to change policy in July, perhaps add more monetary stimulus. With the recent economic indicators, it seems unlikely that we will hear anything new. The monetary stimulus is working its way, slowly and steadily. In the accompanying press conference, BOJ officials can signal the next moves.
- BOJ Monthly Report: Wednesday, 5:00. The BOJ will have another opportunity to move the markets after the rate decision. It will be interesting to see if the central bank sees a real rise in inflation, thus indicating the beginning of the end of Kuroda’s monetary blitz from April 2013.
- Monetary Policy Meeting Minutes: Thursday, 23:50. With all the previous events from the BOJ, these meeting minutes from a meeting held over a month ago are likely to have a smaller effect. Nevertheless, any notes that the nine members may have had can also shake the yen.
* All times are GMT
USD/JPY Technical Analysis
Dollar/yen started the week with a loss of the 102 “magnet” level (mentioned last week) which is failed to recover afterwards. The pair then reached down towards 101 before stabilizing.
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
Dollar/yen is swinging in range for a very long time. After it dropped towards the lower end of the range, we cannot rule out another move back to the magnet line of 102. While the BOJ is not expected to add monetary stimulus, it also does not want a stronger yen. Together with an acknowledgement from Yellen about the improvement in the US economy, we can expect a bounce back to range.
More yen: Long-Term Trend Line In Play For USDJPY
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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