The Japanese yen had an excellent week ,as USD/JPY dropped about 200 points. The pair closed the week unchanged at 118.45. There are seven 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, employment data was solid, as Nonfarm Payrolls was higher than expected, and the unemployment rate fell to 5.6%. There were no major Japanese releases last week.
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY graph with support and resistance lines on it:
- Current Account: Monday, 23:50. Current Account is closely linked to currency demand, so a higher trade surplus than expected is bullish for the yen. The trade surplus jumped to JPY 0.95 trillion in October, well above the forecast of 0.46 trillion. The markets are expecting a smaller surplus for November, with an estimate of 0.69 trillion.
- Economy Watchers Sentiment: Tuesday, 5:00. This indicator remains under the 50-point level, pointing to ongoing pessimism about the economy on the part of surveyed workers. The indicator fell to 41.5 points in November, short of the forecast of 45.9 points. The markets are expecting a strong turnaround in December, with a forecast of 44.3 points.
- M2 Money Stock: Tuesday, 23:50. The indicator has been moving higher, climbing to 3.6% in the November release. An identical gain is expected in the upcoming reading.
- 30-year Bond Auction: Wednesday, 3:45. The yield on 30-year bonds was almost unchanged at the last auction in December, with a yield of 1.46%. Will we see more of the same at the upcoming auction?
- Preliminary Machine Tool Orders: Wednesday, 6:00. This minor event came in at 36.6% last month, up from 31.2% in the previous release.
- Core Machinery Orders: Tuesday, 23:50. The indicator posted a decline of 6.4% in October, the indicator’s first decline in five months. The markets are expecting a strong improvement in the upcoming reading, with the estimate standing at 4.8%.
- Tertiary Industry Activity: Thursday, 23:50. This indicator is an important gauge of the strength of the services sector. The indicator posted a decline of 0.2%, which was within expectations.
* All times are GMT
USD/JPY Technical Analysis
Dollar/yen started the week at 120.39. The pair rose to a high of 120.65, but then reversed directions and dropped to a low of 118.05, as support held firm at 117.94 (discussed last week). The pair closed the week at 118.45.
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
Technical lines from top to bottom:
124.16 marked the start of a yen rally in June 2007, which saw USD/JPY drop to the 96 level.
122.19 remains a strong resistance line which has held firm since July 2007. The next resistance line is 121.39.
119.88 remains busy and switched to a resistance role as the yen posted strong gains.
117.94 held firm but has weakened as a support level. It could see action early in the week.
The next support level is at 116.82.
114.65 has remained intact since December 2007, when the yen posted a strong rally which saw USD/JPY drop below the 96 line.
113.17 is the final support level for now.
I am bullish on USD/JPY
The yen had a solid week, but the currency still remains close to the key 120 line. Monetary divergence should help the US dollar move higher, as the Fed mulls the timing of a rate hike, while the BOJ looks at injecting more stimulus into the sluggish economy.
In this week’s podcast, we offer a preview for 2015: the Fed hike, EZ QE, slippery oil, UK politics, Big in Japan, AUD down under, Loonie blues and Gold
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.
- For the kiwi, see the NZDUSD forecast.
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