USD/JPY moved higher as markets calmed. Can it continue or will risk aversion trigger flows to Japan? The rate decision by the BOJ is the main event. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
According to the latest data, Japan’s economy contracted by only 0.3% in Q2, better than originally published. Worries about future growth due to the Chinese slowdown were brushed away for now. Nevertheless, there is growing talk that the BOJ could introduce more easing in late October. In the US, positive JOLTs data was countered by a weak consumer confidence number. Will the Fed act?
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY graph with support and resistance lines on it:
- Industrial Production: Monday, 4:30. This is the revised figure for July. The initial read disappointed with a drop of 0.6% but significant revisions are common. This time, no change is on the cards.
- Tertiary Industry Activity: Monday, 4:30. This measure in business activity has surprised with a rise of 0.3%. A slower rise of 0.2% is predicted.
- Rate decision: Tuesday, during the Asian session. The Bank of Japan is watching the developments in China carefully and has also probably noted the actions of the ECB. Will it join the currency wars ahead of the Fed? “No change” is usually the headline coming out of the central bank in Tokyo but will this time be different? Will Kuroda announce more action in the same week that Yellen acts?
- BOJ Monthly Report: Wednesday, 5:00. The monthly bulletin from the central bank looks at the economy at large. We could see a comment about the better than expected GDP as well as international developments, which probably matter even more.
- Trade Balance: Wednesday, 23:50. Japan has seen trade deficits in the past 4 months, with the figure for July standing at 0.37 trillion yen, worse than had been expected. A smaller deficit could be seen now: 0.35 trillion.
- Monetary Policy Meeting Minutes: Thursday, 23:50. These are not minutes from this week’s decision, so the impact may be weaker. Nevertheless, the meeting that was held in August was still of importance and the deliberations are of interest.
* All times are GMT
USD/JPY Technical Analysis
USD/JPY kicked off the week with a climb above the very round 120 level (mentioned last week).
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
Technical lines from top to bottom:
The multi-year high of 125.86 is the top level. It is followed by the very round 125 figure eyed by many.
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 and is a stepping stone towards the crash low of 115.90.
I am bearish on USD/JPY
A rate hike in the US / hawkish talk from the Fed could trigger a risk averse reaction in markets, and the yen remains the No. 1 safe haven currency. Talk of easing from the BOJ could weigh on the yen, but it seems that until there is action, JPY sellers will wait. See all the latest about the Fed decision.
In our latest podcast, we prepare you for the Fed decision from all directions
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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