USD/JPY lost ground during the week, but the pair then recovered these losses, and ended the week with modest gains. The pair closed the week at 99.33. This week’s highlight is Tokyo Core CPI. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
The yen showed some strength in mid-week, following the non-taper announcement by the Federal Reserve. The dollar received a boost from strong US releases last week, highlighted by US Unemployment Claims. Manufacturing and housing numbers were also strong.
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY daily chart with support and resistance lines on it. Click to enlarge:
- Corporate Services Price Index: Tuesday, 23:50. Japan continues to post trade deficits, and the July release ballooned to -0.94 trillion yen compared to -0.60 trillion the month before. The markets are expecting an improvement in September, with an estimate of -0.81 trillion yen.
- Tokyo Core CPI: Thursday, 23:50. Kuroda will address a securities conference in Tokyo. Analysts will be looking for clues as to future monetary policy and interest rate moves by the BOJ.
- National Core CPI: Thursday, 23:30. The markets have done a good job of providing accurate predictions for this indicator. The July reading posted a -0.6% decline, which matched the forecast. The markets are anticipating an improvement for the August reading, with an estimate of a gain of +0.3%.
* All times are GMT
USD/JPY Technical Analysis
We begin 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 has seen action in September and continues to provide resistance. Will it face more action in the coming week?
98.90 was briefly breached as the yen climbed higher, but remained intact at the end of the week. It is a weak line and could face pressure early this week.
97.80 is next. This line was quite busy in June and in late July and was breached last week as the pair dropped sharply before bouncing higher.
96.71 continues to provide strong support. This is followed by the round number of 95, a psychologically significant line. This line has held firm since mid-June.
The final support level for now is 93.79. This line 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.
I am neutral on USD/JPY
It was a busy week for the pair
, as the US dollar dropped sharply against the yen but then recovered these losses. US releases looked sharp last week, and the improving US economy bodes well for the dollar. At the same time, the Japanese economy has been picking up steam, and if this week’s inflation numbers are strong, the yen could gain ground.
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.
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