Dollar/yen did not go anywhere fast in the first week of 2018. The US dollar was down against many currencies despite good data, but this did not affect USD/JPY. The stability came despite a busy week to start the year. Will the pair move now, when the calendar is lighter?
USD/JPY fundamental movers
Good US data, balanced Fed
The ISM Manufacturing PMI and the ADP NFP significantly beat expectations, leading to higher expectations for the NFP.
The FOMC meeting minutes showed a divided Federal Reserve. They still haven’t figured out why inflation remains low. Nevertheless, the hawkish camp seems to be in control, at least for now, until Powell enters his role as Fed Chair.
Japan was on holiday throughout most of the week, but the Nikkei stock index reached new highs. In theory, that should support a stronger USD/JPY, but there is no evidence of that so far.
Inflation, retail sales and perhaps political developments
The second week of 2018 looks light in terms of calendar events, but still features the all-important CPI report from the US. The retail sales data will be released at the same time and will compete for attention. The PPI is also worth mentioning as a warm up to the CPI data.
The scandals engulfing the White House have raised a lot of interest but haven’t triggered any market movements. Will it change as the book is actually published?
In Japan, consumer confidence, the current account, and the economy watchers sentiment are released but are unlikely to trigger any reaction.
See all the main events in the Forex Weekly Outlook
Key news updates for USD/JPYUpdates:
- Jan 12, 14:39: US core CPI beats with 1.8% – good enough for the dollar? Not necessarily: Core CPI is up 0.3% m/m and 1.8% y/y, both better than expected. Headline CPI missed with 0.1% m/m but...
- Jan 10, 23:33: Scope For Further JPY Strength Towards 110 After BoJ’s Move – BTMU: The Bank of Japan triggered a “mini taper tantrum” with its tests. In addition, the news about China’s intention to...
- Jan 10, 12:00: USD crashes on report that China will halt buying US bonds – updates on 5 pairs: According to a report by Bloomberg, China is considering a halt or at least a slowdown in buying US treasuries....
- Jan 9, 8:58: USD/JPY suffers a minor taper tantrum – higher inflation needed for a lasting move: The Bank of Japan stands out among central banks in developed countries. They are on the extreme dovish end, buying...
- Jan 8, 12:13: Wages not winning, tax cuts to cut it? – MM #169: It’s 2018 and we are back to business. We begin with digesting the fresh jobs report and move to the...
USD/JPY Technical Analysis
115.35 is an old line that served as support when the pair traded on higher ground. 114.50 is the cycle high last seen in early July. The pair got close to that level.
113.70 was a separator of ranges in June and a line of resistance in December. It caps the range. 112.90 served as support in December and is a pivotal line in the range.
112.20 used to be important in the past. It is closely followed by 111.70, which provided support back in October. The round level of 111 worked as a cushion to the pair in November.
Looking down, 110.70 was a separator of ranges in June and remains important. 109.60 was a gap line in late April, a gap that was never closed.
In June, the pair found support several times at 109.10 and this also works as support. Further below, the cycle low of 108.10 is of high importance.
USD/JPY Daily Chart
I am bearish on USD/JPY
This pair may play catch up with the dollar’s fall against other currencies.
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