USD/JPY went back up in the well known range. When will it make a significant move and to which direction? Current account leads the list of indicators. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
The closely watched Tankan Manufacturing Index disappointed with a drop to 12 points in Japan and housing starts plunged by 15% y/y. And on the other side of the Atlantic, the better than expected Non-Farm Payrolls in the US showed a gain of 288K jobs, with yet another drop in the unemployment rate. This led to a stronger USD/JPY, but well within the range.
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY graph with support and resistance lines on it. Click to enlarge:
- Leading Indicators: Monday, 5:00. This compound index, made out of 11 indicators, is already below the peak of 113.1% seen earlier in the year, but remains in a positive 106.5% in April. A slide to 106% is expected for May.
- Current Account: Monday, 23:50. Japan saw a surplus in its current account in April, with +0.13 trillion yen. This positive number is not that common since the 2011 natural disaster, when Japan began importing growing amounts of energy. Another surplus of 0.17 trillion yen is expected for May.
- Economy Watchers Sentiment: Tuesday, 5:00. This official government figure slipped below 50 points in the past two months, reflecting pessimism. The survey of 2000 workers is now predicted to edge up back to 49.2 points, reflecting very mild pessimism in May.
- M2 Money Stock: Tuesday, 23:50. The total quantity of currency in banks and in circulation surprised with an annual rise of 3.3% in May. This measure of inflation is expected to print a rise of 3.1% now.
- Machine Tool Orders: Wednesday, 6:00. This preliminary report for June is expected to show another y/y slowdown in growth of this figure at the far end of the supply chain, after a gain of 24.1% in May.
- Core Machinery Orders: Wednesday, 23:50. The official figure for May is expected to show a recovery in this industrial figure. A drop of 9.1% was reported in April.
- Tertiary Industry Activity: Wednesday, 23:50. While slightly overshadowed by the previous figure, this measure of the services sector can also have a significant impact. METI’s number is expected to rise by 1.9% in May, after a sharp drop of 5.4% in April, probably a result of the sales tax hike.
- Consumer Confidence: Thursday, 5:00. This wide survey of 5000 households has shown an improvement in May with a rise to 39.3 points. Another move higher is predicted now, to 40.7 points, similar to the level seen in January.
* All times are GMT
USD/JPY Technical Analysis
Dollar/yen began the week with a move to resistance at 101.60 (mentioned last week). It then continued higher, eventually dropping from the 102.30 level, only to stick to its magnate at 102.
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.
101.30 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 mentioned last week, the NFP certainly helped the pair. With some weak Japanese data, some momentum can be maintained. A lot also depends on the FOMC meeting minutes. Also note the moves in US bond yields.
More: Reasons to be (dollar) cheerful
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.