Home USD/JPY Forecast Feb. 23-27

USD/JPY was unchanged for a second straight week, as the pair closed just below the 119 line. 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.

Japanese GDP in Q4 posted a respectable gain of 0.6% but this was short of the estimate of 0.9%. In the US, the Fed minutes were dovish in stance, as policymakers raised concerns that a rate hike might hurt the US recovery. Unemployment claims dropped sharply, but manufacturing numbers disappointed.

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USD/JPY graph with support and resistance lines on it:

USDCAD_Forecast Feb.23-27

  1. Monetary Policy  Meeting Minutes:  Sunday, 23:50. The BOJ will release the minutes of last week’s policy meeting. At the meeting, the BOJ said it would continue its accommodative monetary stance. The markets are not expecting any surprises from the minutes.
  2. SPPI: Monday, 23:50. This index measures corporate inflation. The index has been very steady, with three straight readings of 3.6%. No change is expected in the upcoming release.
  3. Household Spending: Thursday, 23:30. This is an important indicator of consumer spending. The indicator continues to post declines, and the December reading of -3.4% was much worse than the estimate of -2.3%. Another decline is expected in the January reading, with an estimate of -4.0%.
  4. Tokyo Core CPI: Thursday, 23:30. This is the primary gauge of consumer inflation and should be treated as a market-mover. The index has been steady losing ground since July 2014 and came in at 2.2% in December, matching the forecast. No change is expected in the upcoming release.
  5. Preliminary Industrial Production: Thursday, 23:50. The indicator rebounded nicely in December, posting a gain of 1.0%. However, this fell short of the estimate of 1.3%.
  6. Retail Sales: Thursday, 23:50. Retail Sales is the primary gauge of consumer spending and can have a significant impact on the movement of USD/JPY. The indicator continues to fall, slipping to 0.2% in December. This was well short of the estimate of 1.1%. The downward trend is expected to continue in January, with a forecast of -1.1%.
  7. Housing Starts: Friday, 5:00. This minor event continues to post sharp declines and came in at -14.7% in the December release. Another weak reading is expected in January, with the estimate standing at -11.1%.

* All times are GMT

USD/JPY Technical Analysis

USD/JPY  started the week at 118.63. The pair  dropped to a low of 118.24, as support held firm at 117.94 (discussed last week).  The pair then reversed directions, climbing to a high of 119.42. The pair closed the week at 118.97.

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.

121.39 is the next resistance line.

119.88 held firm as the pair pushed higher late in the week.

117.94 is providing support. The line held firm for a second straight week as the yen lost ground before recovering.

116.82  is providing strong support  and has remained intact  since mid-January.

116.02 is the next support level.

114.65 is the final support level for now. This line has remained intact since December 2007, when the yen posted a strong rally which saw USD/JPY drop below the 96 line.

I am  bullish on USD/JPY

The US economy continues to outperform that of Japan,  although  both economies are struggling with weak inflation levels.  Although recent  numbers have been lukewarm of late, but the  markets continue to  bank on a  rate hike sometime in 2015, and monetary divergence will likely continue to weigh on the Japanese yen.

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Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.