Dollar/yen failed to breach 110 in its second attempt. After failing to break higher, the pair is not falling very fast. What’s next? The US retail sales report and also Japanese GDP stand out.
USD/JPY fundamental movers
Inflation and geopolitics
US inflation disappointed and sent the US Dollar down. It was probably the last thing to break the greenback after the NFP fell short of expectations beforehand. But while the American currency fell against most currencies, the reaction was limited against the yen. It may a risk-on move of sorts, which brings us to geopolitics.
US President Donald Trump announced the abandonment of the Iran deal and the imposition of sanctions. In addition, Israel and Iran clashed in Syria. While oil prices reached the highest levels since 2014, the safe-haven yen did not experience any special demand. This may have been the result of yet another positive development in the world: North Korea’s leader Kim Jong-un will meet US President Donald Trump on June 12th in Singapore.
US Retail Sales, Japan’s GDP
The primary US release is the retail sales report on Tuesday. The most important component, the Control Group, is expected to rise by 0.4%, just like last time. After the blow from the inflation data, a positive figure is needed to boost the greenback. In addition, housing data will be of interest.
In Japan, we will get the first release of Q1 GDP, which is expected to be flat after a growth rate of 0.4% in Q4 2017.
See all the main events in the Forex Weekly Outlook
Key news updates for USD/JPYUpdates:
- May 18, 17:15: USD/JPY has a barrage of Fed-speak to determine its next move: The USD/JPY had a successful, third run on 110.00, thanks to rising yields. The FOMC meeting minutes and a barrage...
- May 18, 8:36: After the jump, USD/JPY path of least resistance is still to the upside: The USD/JPY continued its upward march and flirted with 111.00 as indicators on both sides of the Pacific supported the...
- May 18, 7:29: USD/JPY: What’s Going With Japan; What’s The Trade? – TD: Dollar/yen reached news highs around 111. Can it continue higher? What’s next? Here is the view from TD: Here is their...
- May 15, 14:20: US Retail Sales provided the spark to set the dollar rally on fire: US Retail Sales came out as expected, on both the headline and the all-important control group. Good news came from...
USD/JPY Technical Analysis
112.20 supported the pair back in December. It is followed by 111.50 that capped the pair in January.
Further down, 110.50 was a swing high in February. The round number of 110 serves as a psychological level. 109.50 held the pair back in late April.
109 was a pivotal line within the range. 108.30 was the low seen in late January. Even lower, we find 107.50 capped the pair in early April and is a strong line.
106.50 was a resistance line in mid-February. and then resistance in early March. 105.55 was the first swing low.
USD/JPY Daily Chart
I am neutral on USD/JPY
The second failure to capture 110 is telling: it is a hard hurdle. While the Fed is on course to tighten and the BOJ insists on loose monetary policy, we could see further consolidation before another move to the upside.
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