USD/JPY posted modest gains last week, as the pair closed at 102.89. The upcoming week is busy, with 10 events. Here is an outlook on the major market-movers and an updated technical analysis for USD/JPY.
Japanese events were uneventful last week. In the US, employment numbers looked very sharp, led by a strong Non-Farm Payrolls.
[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 closely linked to currency demand, as an improved current account reading means that foreigners are purchasing more yen to but domestic goods and services. After a disappointing deficit in October of -0.13 trillion yen, the markets are expecting a surplus for November, with an estimate of 0.12 trillion. If the indicator can meet or beat the estimate, we could see the yen gain ground.
- Final GDP: Sunday, 23:50. GDP, released each quarter, is one of the most important economic indicators and is always closely watched by analysts. GDP posted a strong gain of 0.9% in Q2, just shy of the estimate of 1.0%. The markets are expecting a downturn in Q4, with an estimate of 0.4%.
- Economy Watchers Sentiment: Monday, 5:00. This survey asks workers to rate economic conditions. The index has been above the 50-point level for most of 2013, signaling optimism. The index came in at 51.8 points in October and the estimate for November stands at 52.3 points.
- BSI Manufacturing Index: Monday, 23:50. This important manufacturing indicator, released quarterly, tends to show significant movement, often leading to estimates that are well off the mark. The Q2 improved sharply to 15.2 points, well above the estimate of 7.2. The markets are expecting another strong release in Q3, with an estimate of 17.2. A reading above the zero level indicates optimism.
- Tertiary Industry Activity: Monday, 23:50. This indicator looks at the value of services purchased by businesses and is an important gauge of business hiring and spending. The indicator has struggled, posting three declines in the past four releases. The markets are anticipating better news in November, with an estimate of a 0.3% gain.
- 30-year Bond Auction: Tuesday, 3:45. The average yield on 30-year bonds has been very steady, with the previous yield coming in at 1.62%. As a minor event, this release is unlikely to have a major impact on the movement of USD/JPY.
- Consumer Confidence: Tuesday, 5:00. Despite some improvement in the Japanese economy, consumer confidence remains weak. The October reading fell to 41.2 points, well short of the estimate of 46.3. A reading below the 50 level indicates pessimism. The estimate for the November release stands at 44.2 points.
- Preliminary Machine Tool Orders: Tuesday, 6:00. This indicator surprised the markets with a strong gain of 8.4% in the previous reading. The indicator had posted consecutive declines since April 2012, so this rebound was welcome news from the manufacturing sector. The markets are hoping for another strong rise in the upcoming release.
- Core Machinery Orders: Tuesday, 23:50. This important manufacturing release tends to fluctuate sharply, making accurate forecasts a tricky task. Last month’s decline of 2.1% missed the estimate of a 1.8% loss. The markets are expecting better news for November, with an estimate of 0.9%.
- Revised Industrial Production: Friday, 4:30. This indicator measures manufacturing output. The indicator rose 1.3% in October, falling short of the estimate of 1.5%. The estimate for the November release stands at 0.5%.
*All times are GMT.
USD/JPY Technical Analysis
We start with resistance at 106.66, which has held firm since November. 2008. At that time, USD/JPY was in a downward spiral which saw it drop below the 0.90 line. This is followed by resistance at 105.70.
This is followed by resistance at the round number of 104. This was a key line back 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 has been busy and ended the week in a support role. This is a weak line which could see more activity early next week.
101.44 was the post-crisis high seen in April 2009, and continues to provide support. It held firm as USD/JPY slid sharply late in the week before recovering.
100.85 saw activity in July as the dollar showed strength against the yen. It has some breathing room as the pair trades at higher levels.
100, a key level, has strengthened in support as USD/JPY trades at higher levels. 98.80 is the next support level.
97.80 continues to provide strong support. 96.59 has held firm since the first week in October. It marks the low point of a downward trend by the pair which started in late September.
The round number of 95 is a psychologically significant line. It has held firm since mid-June.
I am bullish on USD/JPY
The dollar continues to trade at high levels and briefly burst across the 103 line last week. Strong US employment numbers have fuelled speculation about a December taper by the Fed, so we could see the dollar push higher, as QE tapering is dollar-positive.
- 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.
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