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USD/JPY Outlook February 11-15

USD/JPY advanced to new highs above 94, but could not hold on to them. Will Japanese authorities continue talking the yen up towards the G-20 summit? Japan’s rate decision and the G20 meetings are the main market-movers this week. Here’s an  outlook  for the Japanese events and an updated technical analysis for  USD/JPY.

Last week, BOJ governor Masaaki Shirakawa  announced he will leave his post on March 19, 2 weeks before his planned retirement together with his two deputies. This announcement raises anticipation for more aggressive monetary easing in the coming weeks. The new Prime Minister Shinzo Abe pressured the BOJ to exercise all its powers to lift the  economy  out of recession, using bolder monetary policy than the tepid policy used by the outgoing BOJ chief. Will the new measures achieve the required goal?  Let’s Start:

Updates: M2 Money Stock rose 2.7%, edging past the estimate of 2.6%. Consumer Confidence looked good, climbing to 43.3 points. This easily beat the estimate of 40.5 points, and was the indicator’s strongest reading since July 2010. Preliminary Machine Tool Orders posted another sharp decline, dropping 26.1%. Tertiary Industry Activity and CGPI will be released later on Tuesday. USD/JPY continues to push higher, as the pair was trading at 94.30. Tertiary Industry Activity had its best showing in a year. The indicator jumped 1.4%, easily beating the estimate of 0.8%. CGPI declined by 0.2%, just beating the forecast of -0.3%. Preliminary GDP was a disappointment, as the Japanese economy contracted by 0.1%. The estimate stood at a 0.1% gain. Preliminary GDP Price Index pointed to continuing deflation, as it declined by 0.6%. The drop was stronger than anticipated, as the forecast stood at -0.5%. As expected, the BOJ did not introduce further easing measures, and maintained the benchmark interest rate at <0.10%. The yen has edged higher, as USD/JPY was trading at 93.19.


USD/JPY  daily chart with support and resistance lines on it. Click to enlarge:USDJPY Technical Analysis February 11 15 2013

  1. M2 Money Stock: Monday, 23:50. Japan’s M2 money stock gained 2.6% on year in December, following 2.1% increase in November. The reading was above the 2.1% rise predicted, indicating economic activity may be picking up. A rise of 2.6% is forecasted.
  2. Consumer Confidence: Tuesday, 5:00. Japanese consumer confidence deteriorated in December, reaching 39.2 from 39.4 in the preceding month, indicating consumers are still worried about the outlook for the economy. The reading was below the 40.7 reading forecast by analysts. A rise to 40.5 is expected this time.
  3. Machine Tool Orders: Tuesday, 6:00. Machine tool orders for December plunged 27.5% on a yearly base to 84.07 billion yen, marking the eighth consecutive month of decline. The reading followed a 21.3% drop in November. Orders from domestic clients contracted by 26.5% to 25.9 billion yen, while overseas orders totaled 58.09 billion yen, dropped 27.9%.
  4. Tertiary Industry Activity: Tuesday, 23:50. Japanese service sector activity declined in November by 0.3% following a 0.1% increase on October, indicating Japan continues to decline. However according to leading indicators of economic health index, the tertiary industry activity index rose, indicating improvement in the economy. A gain of 0.8% is expected now.
  5. GDP: Wednesday, 23:50. Japan’s gross domestic product contracted 0.9% in the third quarter of 2012, following a 0.2% expansion rate in the second quarter. On a yearly basis, GDP edged down 3.5% a bit worse than the 3.4% contraction predicted by analysts. Japan suffered the most from lack of external demand due to its exports driven economy which lead the BOJ to increase its asset purchase program. An expansion of 0.1% is forecasted.
  6. Rate decision: Thursday. The Bank of Japan decided to embrace the new Prime Minister’s view’s and increase inflation target to 2% as well as embark on a limitless quantitative easing scheme.  This announcement was backed by the governments’ commitment to act to fiscal consolidation and structural reforms. No change in rates is expected.
  7. BOJ Monthly Report: Friday, 5:00. The monthly report for January released that the BOJ upgraded its assessment of the economy claiming consumption has stayed resilient and public works spending has increased. However looking ahead, Japan’s economy is expected to stay flat for a while and return to a moderate growth path as the effects of the government’s stimulus measures take hold and overseas economies gradually emerge from their slump.
  8. G20 Meetings: Fri-Sat. The G-20 meetings   include twenty of the most important economies on the world, comprised of 19 independent countries and the  European Union. Switzerland was invited for the first time by Russia to participate in this prestigious event, despite not being a member. Russia claimed Switzerland will play a central role in decisions for the international financial system. Both Switzerland and Japan intervened in currency markets. Japan might receive criticism for its recent actions, but nothing substantial is expected.

*All times are GMT.

USD/JPY  Technical Analysis

Dollar/ ¥ began the week with a failed attempt to break above the 92.88 line (mentioned last week). A second move already sent the pair to new highs at 94.06. From there, we saw a gradual decline that resulted in a test of support at 92.12 before the pair closed at 92.64.

Technical lines from top to bottom

High in the sky, we find the 97.80 line, which was a peak back in 2009. This is a high level that could be targeted if 95 is breached. Before that, we have 96.90, which was a swing high in July 2009.

A very important line is 94.70 – which capped the pair for long months in early 2010. 93.75 is the swing high of January 2010 and is minor resistance.

92.88 was a peak in June 2010 and is the immediate peak for the pair. 92.12 was a peak in the past, and provides some support, as seen in February 2013.

91.20, which capped the pair very temporarily on its way up in January 2013, is a support line before the round figure of 90. The ultimate support line for now is 90 – a target marked by many analysts and a round number. This line remains close after the break.

Just below, 89.67 capped the pair for several days in January 2013 and is now minor support. Below, 89.10 was a peak in the summer of 2010, before the pair began descending and is now support.

88.40 is the peak of January 2013 and is a strong support line. Below, 87.60 provided support on a pullback when the pair traded higher in January, after previously working as resistance.

86.27, which served as resistance, also in 2010 is weakening now. 85.50 is a high peak seen back in early 2011 and remains important support now.

Another Recent Technical View:  –  USD/JPY Hits New 32-Month High at 93.50 – by James Chen

I am bearish on USD/JPY

The criticism on Japan is mounting, as also the ECB joined in. Mario Draghi hinted that Japan’s inflation goal is a stretch. With the G-20 summit at the end of the week, Japanese politicians already try to ease the tensions, and said that the yen depreciation was too fast. After this week, we will probably see a resumption of the rises: the Japanese economy is still weak, and the US yields still support the greenback.

Further reading:

Anat Dror

Anat Dror

Anat Dror Senior Writer I conceptualize, design and create multi-lingual websites. Apart from the technical work, my projects usually consist of writing content for these sites in English, French and Hebrew. In the past, I have built, managed and marketed an e-learning center for language studies, including moderating a live community of students. I've also worked as a community organizer