USD/JPY Forecast April 8-12 – Trade talk optimism pushes yen lower

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Dollar/yen posted considerable gains for a second successive week. Japanese events tend not to have a significant effect on the pair, but there are some key events out of the U.S. These include consumer spending and the Federal Reserve minutes from the March meeting.

USD/JPY fundamental movers

Japan counts the U.S. and China as two of its major trading partners, so it’s no surprise that Japanese exports have fallen due to the trade war between the U.S. and China. This has taken a toll on the manufacturing sector, as underscored by a weak Tankan manufacturing index release for Q4. The indicator dropped to 12, down from 19 in the third quarter. This marked the index’s weakest score since 2013. However, trade talks between the two super economies have made substantial progress, with reports that an agreement between the world’s two largest economies is 90% complete. This has raised risk appetite, at the expense of the safe-haven yen.

It was a rough start to the week for U.S. indicators. Retail sales dipped 0.2%, its second decline in three months. Durable goods orders also declined. On the employment front, the releases were lukewarm. Nonfarm payrolls for March came in at 196 thousand, easily beating the estimate of 172 thousand. Still, this reading was significantly lower than the December and January releases, both of which were above the 300-thousand level. Wage growth dipped to 0.1%, shy of the estimate of 0.3%.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

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 (mentioned last week).

Close by, 111.40 was another swing low in October.

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.

107.50 capped the pair in early April.

USD/JPY Daily Chart

https://www.tradingview.com/x/fYv60vt9/

USD/JPY Sentiment

I am bullish on USD/JPY

The U.S. economy may have slowed, but still remains much stronger than the fragile Japanese economy. With growing optimism that the U.S. and China will reach a trade deal, risk appetite is higher, which has made the yen less attractive to investors.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.