The US dollar climbed about 150 points last week, as USD/JPY closed at 114.58. This is the highest level we’ve seen since November 2007, but not the highest the pair reached in an exciting week. There are six events this week. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
US Nonfarm Payrolls slipped to 214 thousand, well short of the estimate of 235 thousand. On a brighter note, the Unemployment Rate slipped to 5.8%, its lowest level in six years. In Japan the BoJ minutes reiterated concerns over weak inflation in Japan, which prompted the BoJ to raise stimulus levels a week earlier.
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY graph with support and resistance lines on it:
- Current Account: Monday, 23:50. Current Account is directly related to currency demand, as foreigners must purchase Japanese yen in order to buy Japanese goods and services. Last month, the indicator posted a surplus of JPY 0.13 trillion, shy of the estimate of JPY 0.19 trillion. The surplus is expected shrink to 0.13 trillion in the upcoming release.
- Consumer Confidence: Tuesday, 5:00. Consumer Confidence is closely connected to consumer spending, a key engine of economic growth. The indicator dipped to 39.9 points in September, shy of the estimate of 42.2 points. The estimate for the October reading stands at 40.6 points.
- Preliminary Machine Tool Orders: Tuesday, 6:00. This is the first manufacturing event of the week. The indicator has been on a downward trend, dipping to 34.8% last month.
- Tertiary Industry Activity: Tuesday, 23:50. This indicator measures the change in total value of services purchased by businesses. The indicator has not looked strong and posted a decline of 0.1% last month. This was short of the estimate of 0.2%. The markets are expecting a sharp turnaround in the upcoming release, with an estimate of 0.9%.
- Core Machinery Orders: Wednesday, 23:50. Core Machinery Orders is one of the most important manufacturing indicators, so an unexpected reading can affect the movement of USD/JPY. The indicator has posted sharp gains in recent releases, and climbed 4.7% last month. The markets are braced for a much softer reading for the September reading, with the estimate standing at -1.0%.
- Revised Industrial Production: Thursday, 4:30. This minor indicator continues to struggle, alternating between gains and declines. Last month, the indicator came in at -1.9%, weaker than the estimate of -1.5%. The markets are expecting strong gains in the upcoming release, with an estimate of 2.7%.
* All times are GMT
USD/JPY Technical Analysis
Dollar/yen started the week at 112.83. After touching a low of 112.57, the pair posted strong gains and broke above resistance at 114.65 (discussed last week), climbing to a high of 115.58. USD/JPY closed the week at 114.58.
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
Technical lines from top to bottom:
With the dollar posting strong gains, we start at higher levels:
119.88 has held firm as resistance since October 2007. 117.94 is next.
116.66 has provided resistance since October 2009.
114.65 was tested last week and is a weak resistance line. It has remained intact since December 2007, when the yen was in the midst of a strong yen rally which saw USD/JPY drop below the 96 line.
113.68 has switched to a support role as USD/JPY continues to move to higher levels.
112.48 started the week as a weak support line but has strengthened.
110.68 represented a high point of a strong dollar rally in August 2008, which started around the key 100 level. It is the final support level for now.
I am bullish on USD/JPY
With QE finally behind us, the focus shifts to an interest rate hike. The US economy continues to improve and wages could move upwards, which will put pressure on the Fed to raise interest rates. With the BoJ raising stimulus earlier in the month, the wobbly yen could fall even further.
In our latest podcast, we run down the ECB, talk about the huge Japanese move, preview the UK and also talk about Brazil:
Subscribe to our podcast on iTunes.
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.
Share
