USD/JPY Forecast May 18-22 -Japan Likely in Recession; Will Yen Slide?

Updated: 17 May. 2020 | 17:45

Dollar/yen had an uneventful week, but the pair managed to eke out a small gain for the first time in six weeks. Investors will be keeping an eye on Japan’s GDP for Q1, which is projected to decline by 1.1 percent. GDP in the fourth quarter fell by 1.6%, and another decline would mean that Japan is officially in recession. In the U.S., the FOMC releases its minutes of the April meeting. We’ll also get a look at unemployment claims and the Manufacturing PMI.

USD/JPY fundamental mover

Japan’s economic conditions have deteriorated sharply due to the impact of Corvid-19. Japan’s current account surplus fell sharply to JPY 0.94 trillion in March, down from 2.38 trillion a month earlier. With oil prices plummeting, wholesale prices fell by 2.3 percent in April from a year ago, the sharpest decline since November 2016.

In the U.S., inflation tanked in April, as the economy continues to buckle under the weight of the Corvid-19 pandemic. CPI declined by 0.8%, down from -0.4% a month earlier. The core read fell by 0.4%, down from -0.1% in the previous release. Both figures missed their estimates. Unemployment claims continue to fall and dropped below 3 million last week, with a release of 2.98 million. Still, this missed the estimate of 2.5 million. Retail sales were a disaster in April – the headline figure fell by 16.4%, while the core read declined by 17.2 percent. Analysts had projected declines of -12.0% for the headline and 16.4 for the core releases.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

We start with resistance at 110.62.

109.73 is protecting the 110 level, which has psychological significance.

108.70 (mentioned last week) is next.

108.10 has held in resistance since mid-March.

107.30 is an immediate resistance line.

106.61 is providing support. 105.55 is next.

104.65 has held in support since early March.

102.50 is the final support line for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am neutral on USD/JPY

Both the Japanese yen and the U.S. dollar are considered to be safe-havens assets in times of trouble, so it’s not altogether surprising that USD/JPY has remained relatively steady since late March. This trend could continue next week.

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Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer. Kenny's Google Profile

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