USD/JPY Outlook July 8-12

The US dollar  gained about 150 points against  the  yen last week, and climbed above the 101 line. The pair closed the week at 101.17. This week’s  market-movers  include Current Account and the BOJ Monetary Policy Statement.

The US dollar was broadly stronger following Friday’s solid Non-Farm Payrolls, and the yen retreated as a result, as USD/JPY climbed above the 101 level for the first time since late May.

Updates:

• USD/JPY continues to be bid and trades above 101.  Current Account came at 0.62 trillion yen, as expected, and the  Economy Watchers Sentiment fell to 53 points. Bank Lending gained 1.9%.
• The markets await the BOJ decision. More:  Dollar love
• M2 Money Stock continues to grow, posting a gain of 3.8%. Preliminary Machinery Tool Orders declined by 12.4%.
• Tertiary Industry Activity and CGPI will be released  later on Tuesday. The markets   are expecting strong gains from both indicators.
• USD/JPY is steady, trading at 101.17.
• There is talk that the Japanese government will raise the bar for the BOJ by setting a new “core-core” inflation target – inflation excluding both fresh food and energy. This could allow the BOJ to act more aggressively, thus further weakening the yen.
• Japan’s  Tertiary Industry Activity exceeded expectations and rose by 1.2%. USD/JPY made a sharp drop under 100 before recovering. Ben Bernanke and the FOMC meeting minutes are awaited.
• CGPI  climbed from 0.6% to  1.2% in  June,  its sharpest rise since January 2012. It’s another sign that the deflation appears to be receding. Core Machinery Orders jumped 10.5%, crushing the estimate of 1.9%.
• Consumer Confidence dropped  from 45.7 points to 44.3 points,  well below the estimate of 47.2 points.
• USD/JPY loses 100.  FOMC Minutes  send a confusing message  and  weaken the US dollar.  Bernanke then sends the dollar plunging with dovish comments on the US economy.
• Dollar/yen crashes to 98.23 on the Bernanke burnout, but then recovers in the European session to above 99. These are big moves.
• The BOJ wrapped up a two day policy meeting. As expected, there were no changes to monetary policy,  and the BOJ sounded cautiously  optimistic about the economy.
• Revised Industrial Production and the BOJ Monthly Report will be released on Friday.
• USD/JPY is trading close to the 99 line. Industrial output was revised to the downside: 1.9%.  More:  Fearing the Fed

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

1. Current Account: Sunday, 23:50.  This key indicator is a market-mover, and could produce some movement from USD/JPY at the start of the trading week in the Far East. Current Account has been improving, thanks largely to the weak Japanese yen, which has been a boon for Japanese exports. The previous release  climbed to 0.85 trillion yen, easily surpassing the estimate of 0.39 trillion. The forecast stands at 0.62 trillion. Will the indicator again post a strong release?
2. Economy Watchers Sentiment: Monday, 5:00. This survey asks workers to rate consumer spending, which is a critical component of economic growth. The  indicator has missed the estimate for the past two readings. The forecast for the upcoming reading stands at 55.6 points, and the markets will be hoping that the indicator can meet or beat this prediction.
3. M2 Money Stock: Monday, 23:50. This indicator measures the amount of domestic currency which is in circulation and held as bank deposits. The BOJ”S monetary policy has led to a steady increase in this indicator, which rose to 3.4% in the June reading. No change is expected in the July release.
4. Preliminary Machine Tool Orders: Tuesday, 6:00.  This indicator helps analysts track the health of the manufacturing sector.  The indicator has been pointing to sharp contraction in 2013, but the previous release pointed to a much smaller decline, with a reading of -7.4%. With the Japanese economy showing some improvement, the markets will be hoping for a stronger reading this time around.
5. BOJ Monetary Policy Meeting Minutes: Tuesday, 23:50. This release provides analysts with the minutes of the BOJ’s previous policy meeting, and provides insights into the reasoning behind the central bank’s interest rate decision. This release often moves the markets, and  a release that is more hawkish than expected is bullish for the yen.
6. Tertiary Industry Activity: Tuesday, 23:50. This indicator provides a good look at the service sector, and focuses on the change in the total value of services purchased by Japanese businesses. The indicator has fallen below the estimate for the past two readings, and came in at a flat 0.0% in June. The markets are expecting a turnaround in July, with a estimate of a 0.9% gain. Will the indicator meet or beat this prediction?
7. CGPI: Tuesday, 23:50. Inflation is a cornerstone of the Japanese government’s economic and monetary policy, as the Abe government pushes hard to stamp out deflation, which has hobbled the economy for years. CGPI measures corporate inflation, and the index rose to 0.6% last month, its first reading above zero in 2013. The markets are expecting a sharp rise this month, with an estimate of a 1.2% gain.
8. Consumer Confidence: Wednesday, 5:00. Consumer Confidence is a useful tool for measuring consumer spending, as a consumer who is optimistic about the economy will feel more comfortable making purchases. The indicator surveys about 5,000 households for their views of economic conditions. In the previous release, the indicator hit its best level of the year, at 45.7 points. The forecast for the July reading stands at 47.2 points.
9. Core Machinery Orders: Wednesday, 23:50. This important indicator provides a snapshot of the health of the manufacturing sector. The indicator tends to swing sharply, resulting in forecasts that are often off the mark. However, the estimate of -8.3% was fairly close to the release of -8.8%. The estimate for the July release stands at 1.9%.
10. BOJ Monetary Policy Statement: Thursday, Tentative. Analysts will be carefully combing through this release, which  details the  BOJ’s monetary policy and may provides  clues as to future monetary policy moves. It is a market-mover and could have a major impact on USD/JPY. The policy statement is followed by a press conference, which can also affect the movement of the pair.
11. Revised Industrial Production: Friday, 4:30. This indicator measures the change in value of industrial production. The indicator has posted two consecutive readings of 0.9%. The markets are expecting a strong improvement, with an estimate of 2.0%.
12. BOJ Monthly Report: Friday, 5:00. This report provides the markets with the BOJ’s view of current and future economic conditions. Although it is a third-tier release, analysts are always interested in what the BOJ has to say, and  something unexpected in  the  report could impact on the movement of USD/JPY.

*All times are GMT.

USD/JPY  Technical Analysis