USD/JPY showed some volatility but ended the week unchanged, at 113.67. There are 11 events this week. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
In the US, the services sector report pointed to contraction, but the week wrapped up with an excellent Non-Farm Payrolls report. Wage growth in the US fell by 0.1%, well below predictions. Japanese Retail Sales posted a third straight decline.
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USD/JPY graph with support and resistance lines on it:
- BOJ Governor Haruhiko Kuroda Speaks: Monday, 3:40. Kuroda will deliver remarks at an event in Tokyo. The markets will be looking for hints regarding the BoJ’s future monetary policy.
- Leading Indicators: Monday, 5:00. This event is based on 11 economic indicators. The indicator dropped to 102.0% in December, below expectations. The downward trend is expected to continue in January, with an estimate of 101.6%.
- Current Account: Monday, 23:50. Current Account improved in December, climbing to JPY 1.64 trillion. This beat the estimate of JPY 1.59 trillion. The estimate for January stands at JPY 1.66 trillion.
- Final GDP: Monday, 23:50. Preliminary GDP for Q4 came in at -0.4%, close to the estimate of -0.3%. The estimate for Final GDP is also -0.4%, which would indicate an economy in contraction.
- 30-year Bond Auction: Tuesday, 3:45. Yields on 10-year bonds have been dropping, with the February yield coming in at 1.07%. Will the downward trend continue in the March auction?
- Consumer Confidence: Tuesday, 5:00. Consumer Confidence remains well under the 50-level, which points to a pessimistic consumer. The indicator came in at 42.5 points in January, and the estimate for February is 42.3 points.
- Economy Watchers Sentiment: Tuesday, 6.00. The indicator dropped to 46.6 points in January, well short of the forecast of 48.5 points. The markets are expecting some improvement in February, with an estimate of 47.5 points.
- M2 Money Stock: Tuesday, 23.50. Analysts are interested in this indicator as it is closely linked with interest rates. The indicator rose to 3.2% in January, within expectations. No change is expected in the February report.
- Preliminary Machine Tool Orders: Wednesday, 6:00. This manufacturing indicator continues to post sharp declines, and posted a reading of 17.2% in January.
- PPI: Wednesday, 23:.50. This index measures inflation in the manufacturing sector. The indicator posted a decline of 3.1% in January, weaker than the forecast of -2.8%. The markets are expecting a sharper decline in February, with an estimate of -3.4%.
- BSI Manufacturing Index: Thursday, 23.50. This indicator slipped to 3.8 points in Q4, well off the forecast of 12.1 points. The estimate for Q1 is expected to rise to 4.2 points.
* All times are GMT
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
USD/JPY Technical Analysis
USD/JPY opened the week at 113.71 and dropped to a low of 112 .08. The pair then reversed directions and climbed to a high of 114.55, as resistance held firm at 114.65 (discussed last week). USD/JPY closed the week at 113.67.
Technical lines from top to bottom:
118.05 was a cushion in October 2015.
116.90 supported dollar/yen early in 2015.
115.90 was an important cushion in the second half of 2015.
114.65 is next.
113.71 was an important resistance line in July 2005.
112.48 marked the start of a yen rally in January 2008, which saw USD/JPY drop below the 100 level.
110.68 represented a high point of a strong dollar rally in August 2008, which started around the key 100 level.
I am bullish on USD/JPY
US numbers are showing some improvement after a lukewarm start to 2016. Japanese numbers have been sluggish, and the BoJ is under pressure to implement additional easing. It’s a different scenario in the US, with the Fed showing a tightening bias. although a rate move is unlikely prior to mid-2016.
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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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