USD/JPY continued to rally and gained over 100 points last week. The pair closed at 1.2547, its highest weekly close since May 2002. There are nine 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, an excellent NFP report helped boost the US dollar late in the week against the struggling yen. In Japan, Average Cash Earnings was unexpectedly strong, but this wasn’t enough to stop the yen from sustaining a third straight weekly loss.
[do action=”autoupdate” tag=”USDJPYUpdate”/]USD/JPY graph with support and resistance lines on it:
- Current Account: Sunday, 23:50. Current Account is closely linked to currency demand, as foreigners must buy Japanese goods and services with Japanese yen. In March, the indicator surged to 2.07 trillion yen, well above the estimate of 1.34 trillion yen. Another surplus is expected in the April report, with an estimate of 1.45 trillion.
- Final GDP: Sunday, 23:50. GDP is published each quarter, magnifying the effect of each release. In Q4, the indicator bounced back with a gain of 0.4%, within expectations. The upward trend is expected to continue, with the estimate for the Q1 report standing at 0.7%.
- Economy Watchers Sentiment: Monday, 5:00. This indicator has been above the 50-point line, which separates contraction from expansion, for most of 2015. In April, the indicator improved to 53.6 points, easily beating the estimate of 52.1 points. The May report is expected to be higher, with a forecast of 54.2 points.
- M2 Money Stock: Monday, 23:50. This indicator looks at the total amount of money available in the economy. The indicator has been quite steady, posting two straight readings of 3.6%. No change is expected in the May report.
- Consumer Confidence: Tuesday, 5:00. Consumer confidence is closely connected to consumer spending, a key component of economic growth. The index continues to indicate that the Japanese consumer remains pessimistic, with readings well below the 50-point line. The indicator showed little movement in April, coming in at 41.5 points. This was shy of the forecast of 41.9 points. Little change is expected in the May report, with the estimate standing at 41.9 points.
- Preliminary Machine Tool Orders: Tuesday, 6:00. This minor indicator has been posting weaker gains in the past two readings, and showed a gain of 10.4% in April. Will the indicator show a stronger gain in the May release?
- Core Machinery Orders: Tuesday, 23:50. This is an important indicator which gauges the health of the manufacturing sector. In March, the indicator bounced back with a strong gain of 2.9%, easily beating the estimate of 1.7%. The markets are bracing for a sharp downward trend, with an estimate of -1.7%.
- BSI Manufacturing Index: Wednesday, 23:50. The index has been softening, but has still posted three straight readings above the zero level, which indicates optimism. The indicator slipped to 2.4 points in Q4, falling short of the forecast of 5.7 points. The markets are expecting the index to improve in the Q1 report, with a forecast of 3.2 points.
- Revised Industrial Production: Friday, 4:30. The week wraps up with Revised Industrial Production, which has posted two declines. In March, the indicator came in at -0.8%, worse than the forecast of -0.3%. The markets are expecting a strong turnaround in the April report, with an estimate of 1.0%.
* All times are GMT
USD/JPY Technical Analysis
USD/JPY started the week at 124.24. After touching a low of 123.74, the pair shot higher, climbing to a high of 1.2586, as resistance remained firm at 1.2589 (discussed last week). The pair closed the week at 125.47.
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
Technical lines from top to bottom:
With the US dollar posting strong gains, we start at higher levels:
1.2908 has held firm since May 2002.
1.2774 was an important support level back in March 2002.
1.2684 is the next line of resistance.
1.2659 has remained intact since April 2001.
1.2589 held firm last week as the USD/JPY pushed very close to this line.
124.16 has strengthened in support following the pair’s strong gains.
123.11 marked the start of a lengthy yen rally in July 2007.
122.02 is the next line of support.
121.39 is the final support level for now.
I am bullish on USD/JPY
USD/JPY has gained over 450 points in the month of May, and the rally has continued into June. Q2 numbers have improved over Q1 data, led by an impressive NFP report last week. As well, the sharp monetary stance between the BOJ and the Fed will likely continue to weigh on the pair, with the Fed expected to raise rates in September.
In this week’s podcast, we explain why EUR rallied on Draghi, what’s next, discuss oil and gas, run through the Plus500 story and preview next week’s events.
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 the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the kiwi, see the NZDUSD forecast.
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