USD/JPY Forecast April 1-5 – Yen loses ground despite soft U.S GDP

Dollar/yen rebounded last week, posting gains of close to 1.0 percent. Japan releases the Tankan indices and the key event in the U.S. is nonfarm payrolls.

USD/JPY fundamental movers

Japan’s economy remains fragile, with exports down due to the global trade war. BoJ policymakers remain nervous, and the summary of opinions from the March policy meeting indicated that members debated whether to ramp up stimulus in order to boost the economy. There are concerns that the economy could be heading towards a recession, given the weak global climate and the tax hike scheduled for October.

In the U.S., growth remains respectable, but the economy has slowed down. Final GDP disappointed with a gain of 2.2%, compared to the initial reading of 2.6%. Personal spending posted a weak gain of 0.1%, and CB consumer confidence fell to 124.1, down sharply from 131.4 in the previous release.

See all the main events in the  Forex Weekly Outlook

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

With USD/JPY posting sharp losses, we start at lower levels:

113.15 was a swing high back in July.

112.73 was an important resistance line in October.

112.25 is the next resistance line.

111.65 was a swing low in October, Close by, 111.40 was another swing low in October.

111.15 remains relevant and starts the week as a weak line. Late in the week, the pair broke below 110.40 (mentioned last week).

Close by, 109.35 was a cushion in mid-July.

108.70 was a cushion early in the summer and 108.10 a swing low in late May.

107.50 capped the pair in early April.

106.61 is the final support level for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am bullish on USD/JPY

The global trade war has dampened Japan’s economy, especially the slowdown in China. The BoJ doesn’t have much ammunition to bolster the economy, and with the U.S. economy in much better shape than that of Japan, the yen may have a tough week.

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