USD/JPY posted modest losses last week, as the pair closed slightly below the 120 level. 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.
In the US, the NFP report was a huge disappointment, ending the trading week on a sour note. The yen held its own, but wasn’t able to take advantage of the NFP’s poor performance. In Japan, consumer spending indicators were mixed, as were the Tankan indices. There is growing talk about action from the Bank of Japan in October, but it seems that more easing will await the meeting at the end of the monthdo action=”autoupdate” tag=”USDJPYUpdate”/]
USD/JPY graph with support and resistance lines on it:
- Average Cash Earnings: Monday, 1:30. This indicator is linked to consumer spending, which is a key driver of economic growth. After a sharp decline in July, the indicator rebounded in August, posting a gain of 0.6%. However, this was well short of the forecast of 2.1%. Little change is expected in the upcoming release, with an estimate of 0.7%.
- Monetary Policy Statement: Wednesday, Tentative. The Japanese economy is limping along, as domestic activity remains weak and inflation is stuck at low levels. There is speculation that the BOJ may make a move later in the year, so the markets will be looking for clues about a shift in monetary policy.
- Leading Indicators: Wednesday, 5:00. This indicator is based on 11 indicators, but is a minor event since most of the data has already been released. In July, the indicator slipped to 104.9%, matching the forecast. The estimate for the August release stands at 103.4%.
- Core Machinery Orders: Wednesday, 23:50. This important manufacturing indicator provides a snapshot of the strength of the manufacturing sector. The indicator has struggled, posting two straight declines. The July reading came in at -3.6%, way off the estimate of +3.4%. The markets are expecting a strong turnaround in the August report, with a forecast of a gain of 3.1%.
- 30-year Bond Auction: Thursday, 3:45. The average yield on 30-year bonds has showed little movement in recent months, and the September yield was 1.41%.
- Economy Watchers Sentiment: Thursday, 5:00. In August, the indicator slipped to below the 50-point line, which separates expansion and contraction, for the first time since January. The indicator dropped to 49.3 points, shy of the estimate of 52.1 points. The downward trend is expected to continue, with the September estimate standing at 48.6 points.
* All times are GMT
USD/JPY Technical Analysis
USD/JPY opened the week at 120.39. The pair quickly touched a high of 120.47, and then reversed directions, slipping to a low of 118.68, as support held firm at 118.50 (discussed last week). USD/JPY closed the week at 119.86.
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
Technical lines from top to bottom:
We start with a top level at the round number of 125.
Another round number, 123, was a swing low in July and remains of importance. 121.50 is the high in September and importance resistance.
120.40, which was a swing low in July, defends the round level of 120.
118.50 is the next key level after working as such during the spring and also lately.
116.90 supported dollar/yen early in the year.
115.90 is the final support level for now.
I am neutral on USD/JPY
The negative effect of the weak US Nonfarm Payrolls could extend into next week, which could help boost the yen. At the same time, the markets haven’t given up on a rate hike before the end of the year, and monetary divergence continues to favor the US dollar versus the yen.
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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 the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the kiwi, see the NZDUSD forecast.
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