USD/JPY reversed direction this week and moved to higher ground, briefly pushing across the 100 line. The pair closed just above the 99 line, at 99.07. The upcoming week is busy, with 11 events on the schedule. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
Japanese data was uneventful last week. US PMIs looked sharp, but Non-Farm Payrolls fell short of the estimate, ending the week on a disappointing note.
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY daily chart with support and resistance lines on it. Click to enlarge: 
- Current Account: Sunday, 23:50. Current Account is directly connected to currency demand, since a higher surplus means that foreigners are purchasing more yen to purchase Japanese goods and services. The indicator came in at 0.65 trillion yen in July, short of the estimate of 0.73 trillion. The markets are expecting a much smaller surplus in August, with an estimate of 0.32 trillion yen.
- Final GDP: Sunday, 23:50. GDP is the primary gauge of economic activity, and this quarterly release can affect the movement of USD/JPY. Final GDP posted a strong gain of 1.0% in Q1. This was the highest reading since Q1 of 2012. The markets are expecting an identical reading for Q2.
- Consumer Spending: Monday, 5:00. Consumer Confidence is based on a survey of about 5,000 households. The indicator continues to point to weak confidence. Consumer confidence is an important gauge of consumer spending, which is vital for economic growth. The July release came in at 43.6 points, well below the estimate of 45.3 points. The markets are expecting a slight improvement for the August release, with an estimate of 44.3 points.
- Economy Watchers Sentiment: Monday, 6:00. This important consumer spending indicator has been steadily losing ground, but remains above the 50-point level, which indicates optimism. The indicator came in at 52.3 points in July, missing the estimate of 53.5 points. The markets are expecting the downward trend to turn around, with an estimate of 53.8 for the August reading.
- BOJ Monetary Policy Meeting Minutes: Monday, 23:50. BOJ reports are always of interest to analysts, who look for clues as to future monetary policy. The minutes provides a detailed report of the BOJ’s most recent policy meeting, including the factors which influenced the BOJ’s most recent interest rate decision.
- Tertiary Industry Activity: Monday, 23:50. This indicator measures the change in the total value of services purchased by businesses. The indicator disappointed in July, posting a decline of -0.3%. The markets are braced for another decline in August, with the estimate standing at -0.4%.
- 30-year Bond Auction: Tuesday, 3:45. The previous auction posted an average yield of 1.79%. The markets are not expecting a significant change in the upcoming auction.
- Preliminary Machine Tool Orders: Tuesday, 6:00. This manufacturing index continues to post sharp declines, with the past two releases coming in with drops of over 12%. The markets are hoping for a smaller decline in the August release.
- BSI Manufacturing Index: Tuesday, 23:50. This important index is released each quarter, magnifying its impact. The Q1 release looked very sharp, with a reading of 5.0 points, crushing the estimate of -2.1. This was the strongest reading since 2010. The markets are expecting even better news, with an August estimate of 7.2 points. Will the index meet or beat this rosy prediction?
- Core Machinery Orders: Wednesday, 23:00. Core Machinery Orders looks at the value of machinery orders placed by the private sector. The indicator declined in July, dropping 2.7%. However, the markets had expected a decline of -7.1%. The markets are anticipating a strong turnaround in August, with an estimate of a 2.5% gain.
- Revised Industrial Production: Friday, 4:30. The indicator posted its first decline of 2013 last month, with a reading of -3.1%. A much stronger release is expected in August, with an estimate of a strong gain of 3.2%.
USD/JPY Technical Analysis
- Technical lines from top to bottom
We begin with resistance at the round number of 104. This line 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 been quiet 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.
The significant 100 level saw a lot of activity in July. It was back in action this week as the yen has weakened, and was briefly breached during the week. Will it face more action in the coming week?
98.90 was breached for a second straight week as USD/JPY pushed upwards, but remained intact at the end of the week as a weak support line. It could be tested by the pair early in the week.
97.80 is providing support to USD/JPY. This line was quite busy in June and in late July and held firm this week as the pair dropped close to the 98 line.
96.71 is the next support line. This is followed by the round number of 95, a psychologically significant line. It continues to provide support and was last tested in mid-June.
93.79 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.
The final level for now is 92.86 .This line saw action in early March and again in early April. The latter date marked the low point of a dollar rally which saw USD/JPY climb very close to the 100 level.
I am bullish on USD/JPY
The markets continue to speculate that the Federal Reserve could pull the trigger on QE tapering as early as September, and such talk is bullish for the dollar. The 100 level was breached during the week, and USD/JPY could make another move towards this tempting target.
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.
Share
