Masaaki Shirakawa speech, Trade balance and inflation rate are the main events this week. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
USD/JPY daily chart with support and resistance lines marked. Click to enlarge:
Japanese Prime Minister Naoto Kan’s 5.1 trillion yen ($62 billion) stimulus plan won’t solve Japan’s deflation and low growth because Japan’s supply structure fails to meet growing demand said Yuichi Kodama, chief economist at Japan’s third-biggest life insurer. The nation needs to focus on easing regulations, opening its market and changing its supply structure since markets such as medical and welfare services are blocked to private companies due to regulatory obstacles preventing the economy’s growth. Will the stimulus plan prove to be futile or substantial? Let’s start:
- Masaaki Shirakawa speaks: Tuesday, 11:30. BOJ Governor Masaaki Shirakawa will speak in Hong Kong. Masaaki Shirakawa supports the monetary easing plan claims it will accelerate as the economy moves toward a sustainable growth track. He will undoubtedly speak further about this plan in view of Japan’s increasing deflation.
- Trade Balance: Thursday, 00:50. Japan’s Trade balance surplus grew to 587.6 billion yen in September, compared with a prior reading of 589.7 billion yen during August revised to 570.2 billion yen. The actual reading was better than analyst’s expectations of 495.5 billion yen. However Japan still struggles with a decrease in global demand and a strong yen.
- Corporate Services Price Index: Thursday, 0:50. Japan’s corporate service price index fell again by 1.1% in September from a year earlier. Economists expect the year-on-year decline in CSPI to moderate in the coming months as downward pressure on CSPI will be eased by firm international commodity prices, which push up transportation costs.
- Tokyo Core CPI: Friday, 0:30. Consumer prices in Tokyo seen as a leading indicator of prices across Japan fell 0.5 percent in October from a year earlier, from a 1.0 percent drop in September, due in part to cigarette tax hikes from this month. The drop was less than the 0.8 percent decline that had been forecasted. Japan’s core consumer prices fell 1.1 percent in September from a year earlier, down for the 19th straight month due to weak demand following a 1.0 percent drop the preceding month.
- All times are GMT.
USD/JPY Technical Analysis
Dollar/Yen continued rising very gradually and got away from the important 82.87 line (mentioned in last week’s outlook). It fell short of the next level, 84.11, and finally closed at 83.50, a weekly gain of 100 pips within the range.
Looking up, 84.11 is now the immediate and strong resistance line. It provided temporary support for the pair on its way down. Above, 85.93 was a stubborn peak that USD/JPY reached right after the big intervention and serves as another strong line of resistance.
The next lines are rather close – 86.35 was a support line in July and later switched to resistance. And above it, 86.88, that worked as support earlier.
Higher up we have 88.10, which was a support line in March and later served as resistance. The last resistance line for now is 89.15 which capped the pair quite some time ago.
Looking down, 82.87 was the lowest level before September’s intervention and now well behind. Lower, 82 provided strong two weeks ago and beforehand worked as resistance .
Even lower, the 80.40 line, which was the lowest close ever, is another strong support line before the ultimate all-time intra-day low of 79.75 reached in 1995.
I remain bullish on USD/JPY.
The slow recovery in dollar/yen continues as US yields are rising. The Japanese economy was weakened by the strong yen, and there’s further ground for upside correction for USD/JPY.
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/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 the New Zealand dollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar.
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