USD/JPY Outlook October 7-11

USD/JPY  had a relatively quiet week, showing little change. The pair closed the week at 97.37. It’s a busy week coming up, with 12 events, including a couple of speeches from BOJ Governor Haruhiko Kuroda in Washington.

Japanese inflation indicators met their  estimates last week. In the US, Unemployment Claims were down slightly, but key manufacturing and housing data posted declines.

USD/JPY daily chart with support and resistance lines on it. Click to enlarge:    

1. BOJ Monthly Report: Monday, 5:00. This report provides an analysis of current and future economic conditions. It is a minor release, but still of interest to analysts following USD/JPY.
2. Current Account: Monday, 23:50. Current Account is directly connected to currency demand, since a higher surplus means that foreigners are purchasing more yen to purchase Japanese goods and services. The indicator posted a surplus of 0.33 trillion yen in August, down from 0.65 trillion yen the month before. The markets are expecting better news in the upcoming release, with an estimate of 0.65 trillion yen.
3. Economy Watchers Sentiment: Tuesday, Tentative. The indicator  fell to 51.2 points in August, well off  the estimate of 53.8 points.  A stronger release is expected in September, with the estimate standing at 52.2 points.  The indicator has been above the 50-level since January, indicating ongoing optimism with regard to economic conditions.
4. BOJ Monetary Policy Meeting Minutes: Tuesday, 23:50. BOJ reports are always of interest to analysts, who look for clues as to future monetary policy. The minutes provides a detailed report of the BOJ’s most recent policy meeting, including the factors which influenced the BOJ’s most recent interest rate decision
5. Preliminary Machine Tool Orders: Wednesday, 6:00. The indicator continues to post declines, although last month’s reading of -1.8% was the strongest showing in over a year. The markets will be hoping for a reading above the zero level this time around.
6. Core Machinery Tool Orders: Wednesday, 23:50. Core Machinery Orders looks at the value of machinery orders placed by the private sector. The indicator tends to show strong movement, making accurate forecasts difficult. The indicator came in at a flat 0.0% in August, missing the estimate of 2.5%. The estimate for October stands at 2.9%.
7. Tertiary Industry Activity: Wednesday, 23:50. This indicator is    run into trouble, with only one reading above zero in the past four releases. The markets are hoping for better news in the September release, with an estimate of 0.5%.
8. 30-year Bond Auction: Thursday, 3:45. The yield on 30-year bonds has been very steady, with the previous average yield coming in at 1.80%. No major change is expected in the upcoming release.
9. Consumer Confidence: Thursday, 5:00. Consumer Confidence is based on a survey of about 5,000 households. Consumer confidence is an important gauge of consumer spending, which is vital for economic growth. The indicator continues to look sluggish, with last month’s reading coming in at 43.0 points, short of the estimate. The forecast for September stands at 43.8 points.
10. BOJ Governor Haruhiko Kuroda Speaks: Thursday, 16:00. Kuroda will deliver remarks at the Bretton Woods Committee 2013 International Council Meeting in Washington, D.C. The governor’s speeches are often market-movers, and analysts will be looking for clues as to future interest rate policy.
11. Corporate Goods Price Index: Thursday, 23:50. One of this week’s highlights, the Policy  Statement  details the  interest rate decision taken at the previous policy statement and factors that led  up to the decision. The Statement will be carefully scrutinized by analysts for any clues regarding future interest rate moves.   This will be followed by a BOJ press conference.
12. BOJ Governor Haruhiko Kuroda Speaks: Saturday, 20:00. The governor will address the  International Institute of Finance Annual meeting, in Washington D.C. A speech which is more hawkish than expected is bullish for the yen.

* All times are GMT

USD/JPY Technical Analysis

We  start with resistance at the round number of 104. This was a key line in May 2008. At that time, USD/JPY was in the midst of a rally which saw the pair climb as high as 110.

102.50 was an important resistance line  in late May but has not been tested since that time.

101.44 was the post-crisis high seen in April 2009, and has not been tested since mid-July. 100.85 was busy in July as the dollar pushed above the 100 level. This line held intact as the pair pushed into 100-territory this week.

The significant 100  line  saw some activity in  September and continues to provide resistance. It has some breathing room as the pair trades at lower levels.

98.90 held firm as  USD/JPY moved higher early in the week.

97.80  is  next. The line was breached by the pair and has reverted to a resistance role. It is a weak line and could see action early next week.

96.59  continues to provide support. This is followed by the  round number of 95, a psychologically significant  line.  This line has held firm since mid-June.

93.79 marked the low point of  a rally  by  USD/JPY which started in mid-June and saw the  pair climb to the mid-101 range in July.

The final support level for now is 92.88, which last saw activity in April.

I  am  neutral on USD/JPY

USD/JPY had a quiet week, and this could continue. Much will depend on if there is progress in the shutdown, which is putting pressure on the US dollar. If the crisis continues, the US economy could suffer and this could weigh on the US dollar. The markets will be keenly waiting for the release of the minutes of the Fed’s last policy meeting, which could affect the movement of the pair.

Further reading: