USD/JPY Forecast April 15-19 – BoJ downgrade weighs on yen

Dollar/yen posted slight gains gains last week, as the yen continues to lose ground in April. Japanese events tend not to have a significant effect on the pair, but investors will be keeping a close eye on U.S. retail sales reports.

USD/JPY fundamental movers

The Japanese economy continues to struggle, as weak global demand has taken a toll on Japanese exports and manufacturing output. This was reflected in a Bank of Japan forecast last week, which downgraded its assessment for three of the country’s nine regions. All three regions are dependent on electronic exports to China, which has been gripped by an economic slowdown in recent months. Despite the pessimistic report, BoJ Governor Haruhiko Kuroda remained optimistic, saying that stronger domestic demand would offset the decline in exports, which would enable the economy to grow at a moderate pace. Kuroda also said that he was confident that inflation would gradually accelerate towards the BoJ’s target of 2 percent.

In the U.S., inflation levels pointed higher in March. CPI, the key gauge of consumer spending, climbed to 0.4%, its highest gain since January 2018. The producer price index also looked strong, climbing 0.6%, marking a 5-month high.

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Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

115.55 was a high point in the first half of 2017 and remains an upside target. 114.60 was the high point in early October and has held in resistance since then.

114.25 was the high point in November.   Close by, 113.80 was a resistance line in November.

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.

Late in the week, the pair broke through resistance at 111.65.

Close by, 111.40 (mentioned last week) remained relevant throughout the week.

111.15 remains relevant in support.110.40 is next.

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.

USD/JPY Daily Chart

USD/JPY Sentiment

I am bullish on USD/JPY

The economic outlook is much brighter in the U.S. than Japan, and there isn’t much to attract investors to the yen unless risk appetite drops sharply. Trade talks between China and the U.S. continue, but last week a senior U.S. official said that an agreement could be months away. Still any progress between the sides would be good news for the export-dependent Japanese economy.

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