The Japanese yen slumped last week, as USD/JPY climbed 185 points. The pair closed at 103.76. There are nine events this week. Here is an outlook for the highlights of this week and an updated technical analysis for USD/JPY.
Japanese consumer indicators remain weak, as Household Spending and Retail Sales both contracted in July. In the US, the nonfarm payrolls report was dismal, as the indicator plunged to 151 thousand, well short of the forecast of 180 thousand.
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USD/JPY graph with support and resistance lines on it. Click to enlarge:
- Average Cash Earnings: Monday, 00:00. This indicator is linked to consumer spending, a key driver of economic growth. In June, the indicator rebounded and posted a strong gain of 1.3%, well above the forecast of 0.4%. The estimate for the July report stands at 0.5%.
- BoJ Governor Haruhiko Kuroda Speaks: Monday, 2:30. Kuroda will speak at an event in Tokyo. A speech that is more hawkish than expected is bullish for the Japanese yen.
- 30-year Bond Auction: Tuesday, 3:45. The 30-year bond auction rebounded in August, rising to 0.42%. This marked the highest yield in five months. Will the upward trend continue in the September auction?
- Leading Indicators: Wednesday, 5:00. This event is based on 11 economic indicators. In June, the index dipped to 98.4%, shy of the forecast of 99.6%. The estimate for the July reading stands at 98.6%.
- Current Account: Wednesday, 23:50. Current Account is closely linked to currency demand. In June, the current account surplus widened to JPY 1.65 trillion, above expectations. The surplus is expected to narrow in July, with an estimate of JPY 1.59 trillion.
- Final GDP: Wednesday, 23:50. In August, Preliminary GDP came in at a flat 0.0%, short of the estimate of 0.2%. Final GDP for Q2 is expected to show no change, with a forecast of 0.0%.
- Economy Watchers Sentiment: Thursday, 5:00. The indicator continues to post readings well under the 50-point level, pointing to ongoing pessimism about the state of the economy. In July, the indicator improved to 45.1 points, above the forecast of 42.6. Will the upward trend continue in the August release?
- M2 Money Stock: Thursday, 23:50. The indicator posted a gain of 3.3% in July, matching the forecast. An identical gain is expected in the August report.
- Tertiary Industry Activity: Friday, 4:30. This minor indicator gauges spending in the business sector. In June, the indicator rebounded with a gain of 0.8%, easily beating the forecast of 0.3%.The markets are expecting a weaker gain in July, with an estimate of 0.4%.
* All times are GMT
USD/JPY Technical Analysis
USD/JPY opened the week at 101.92 and touched a low of 101.74, as support held at 101.51 (discussed last week). Late in the week, the pair touched a high of 104.32, before retracting and closing the week at 103.76.
Live chart of USD/JPY:
Technical lines from top to bottom:
With USD/JPY posting sharp gains last week, we start at higher levels:
107.49 has been a cap since late July.
106.54 is next.
105.55 was a cushion in May and June.
104.25 was tested in resistance last week for the first time since the end of July.
102.83 has switched to support following sharp gains by USD/JPY. This line was a cap in August.
101.51 has strengthened in support.
99.98 is just below the symbolic round number of 100. It is the final support line for now.
I am bullish on USD/JPY
Despite a weak Japanese economy and rock-bottom inflation, the Bank of Japan continues to remain on the sidelines. In the US, the timing of a move by the Federal Reserve is up in the air but, the direction is clear, as there is a strong likelihood a rate hike before the end of the year.
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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 Canadian dollar (loonie), check out the Canadian dollar forecast.
- For the kiwi, see the NZD/USD forecast
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