USD/JPY traded in a narrow range once again, failing to find a new direction. Will it make a break in the new quarter? The Tankan indices and industrial output are the main events this week. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
BOJ governor Kuroda defended his measures to lift inflation and said they are having the desired effects but left the door open to more action if necessary. In the US, housing figures were good, but the past looks terrible with a revised contraction of 2.9% in Q1. Nothing seemed to move dollar/yen out of the range.
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY graph with support and resistance lines on it. Click to enlarge:
- Industrial Production: Sunday, 23:50. The level of industrial output for the month of April squeezed by no less than 2.8% in the final read, and this can be somewhat blamed on the tax hike. For May, we can expect a recovery in the initial publication now.
- Housing Starts: Monday, 5:00. Year over year, Japan enjoyed strong gains until January, but then it moderated and turned negative. After a slide of 3.3% in April, a modest rise is expected for May.
- Tankan Manufacturing Index: Monday, 23:50. This official figure by the Bank of Japan edged up to 17 points in Q1 2014, the highest since 2007. The survey of 1200 manufacturers is predicted to show yet another rise, reflecting expectations of improving conditions within the industrial ranks.
- Tankan Non-Manufacturing Index: Monday, 23:50. Also in the services sector, the recent print of 24 is the highest in many years and even higher than the manufacturing sector. A similar figure is expected now. Both figures are also of importance due to the reliance of the Japanese government on them for its policy.
- Average Cash Earnings: Tuesday, 1:30. Wages that workers earn serve as another gauge of inflation, especially of core inflation. After a gain of 0.9% in April, a smaller gain is predicted now.
- Final Manufacturing PMI: Tuesday, 1:35. Markit’s purchasing managers’ indicator for the manufacturing sector dipped just below 50 points in April and in May, reflecting contraction. However, the initial figure for June already floated above this figure with 51.1 points. The final print is expected to confirm this return to normal after the effect of the sales tax hike.
- Monetary Base: Tuesday, 23:50. The BOJ publishes the change in its balance sheet, as it is targeting it in its QQE policy. After a gain of 45.6% in May, a small rise year over year rise is expected for the month of June, following the trend of slower gains after the first year of the monetary blitz.
* All times are GMT
USD/JPY Technical Analysis
Dollar/yen traded around the pivotal 102 line (mentioned last week) throughout the week and remained in a narrowing range.
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 turn from neutral to bullish on USD/JPY
The long term direction of the pair is up, thanks to a closer proximity of a rate hike in the US rather than in Japan. The yen has not been able to capitalize on the broad weakness of the US dollar. Is it time for the yen to slide? The early Non-Farm Payrolls report could be the trigger, as more current US economic indicators look positive.
More yen: USD/JPY Leans Lower – Elliott Wave Analysis
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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