USD/JPY showed limited movement for a fourth straight week, as the pair finished the week almost unchanged, at 123.08. The upcoming week has eight events. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.
Federal Reserve chair Janet Yellen provided broad hints that the Fed will raise rates next week, as she took note of the strong job market numbers and didn’t sound concerned about persistently weak inflation. The critical NFP came in above expectations, but both PMI reports disappointed. In Japan, Retail Sales posted a strong gain of 1.8%, its best showing in five months.
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USD/JPY graph with support and resistance lines on it:
- Leading Indicators: Monday, 5:00. This event is based on 11 indicators, but is considered a minor event since most of the data has already been released. The indicator dipped to 1o1.4% in September, as it posted a smaller gain for the third straight week. The markets are expecting a rebound in October, with an estimate of 102.9%.
- BOJ Governor Haruhiko Kuroda Speaks: Monday, Tentative. Kuroda will speak at a financial event in Tokyo. The markets will be looking for clues as to the BOJ’s future plans regarding monetary policy.
- Current Account: Monday, 23:50. The current account deficit narrowed to JPY 0.78 trillion in September, way off the forecast of JPY 1.50 trillion. This marked a 7-month low. Better news is expected in October, with the estimate standing at JPY 1.53 trillion.
- Final GDP: Monday, 23:50. GDP is always highly anticipated and should be treated by traders as a market-mover. Preliminary GDP for the third quarter posted a decline of 0.2%, but Final GDP has been revised to +0.1%. Will the indicator push into positive territory?
- 30-year Bond Auction: Tuesday, 3:45. Yields on 10-year bonds have weakened in recent months, but rebounded in November, with an average yield of 1.39%. No significant change is expected at the December auction.
- Economy Watchers Sentiment: Tuesday, 5:00. This consumer spending indicator has been under the 50-point level, which separates contraction from expansion, for three consecutive months. The October report came in at 48.2 points, which matched expectations. The forecast for November stands at 48.6 points.
- Core Machinery Orders: Tuesday, 23:50. This important manufacturing event rebounded in September, posting a strong gain of 7.5% after three straight declines. This easily beat the forecast of 3.3%. The markets are braced for another decline in October, with a forecast of -1.5%. Will the indicator repeat and beat this prediction?
- BSI Manufacturing Index: Wednesday, 23:50. This manufacturing indicator is released each quarter, magnifying the impact of each release. The indicator surged to 11.0 points in Q2, crushing the estimate of -1.9 points. Another increase is expected in the Q3 report, with an estimate of 12..1 points.
* All times are GMT
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
USD/JPY Technical Analysis
USD/JPY opened the week at 122.83 and climbed to a high of 123.67, testing resistance at 123.00 (discussed last week). The pair dropped to 122.29 late in the week, but recovered and closed the week at 123.08.
Technical lines from top to bottom:
126.59 has remained intact since May 2002.
The very round number of 125 remains an important resistance line.
124.16 was an important cap in late June.
The round number of 123 remains busy and has switched to a support role, but is a weak line. It could see further action early in the week.
121.50 continues to provide strong support. This line was a key resistance line in September.
120.40, which was a swing low in July, is next.
119.19 has held firm since October. It is the final support level for now.
I am bullish on USD/JPY
Although a rate hike in the US is widely expected, there is some room for the dollar to push higher against the wobbly yen. Monetary divergence continues to weigh on the Japanese currency, and with the BOJ under pressure to implement additional easing, the yen may have difficulty attracting investors.
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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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