USD/JPY Forecast Aug. 31-Sep. 4 – Yen jumps after Powell inflation comments

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Dollar/yen ended the week with slight losses, after the yen recovered with strong gains on Friday. In Japan, retail sales are expected to post a fifth straight decline, with an estimate of -1.7 percent. Industrial production is projected to gain 5.0% and Manufacturing PMI is expected to rise to 46.6, up from 45.2. The US releases ISM Manufacturing and Non-Manufacturing PMIs, as well as nonfarm payrolls and wage growth.  
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USD/JPY fundamental mover

The focus was on inflation releases last week. BoJ Core CPI, the preferred inflation gauge for the Bank of Japan,  dipped from 0.1% to a flat 0.0%. Tokyo Core CPI declined by 0.3%, its sharpest decline since March 2017.

Over in the US, Conference Board Consumer Confidence slipped to 84.8, down from 91.7 beforehand. Durable Goods Orders were mixed – the headline reading accelerated 11.2%, up from 7.3% in the previous release. However, the core release slowed to 2.4%, down from 3.3% beforehand. US second-estimate GDP was upwardly revised to 31.7%, compared to 32.9% in the initial release.

Federal Reserve Chair Jerome Powell made a dramatic address at the Jackson Hole meeting. Powell said that the Fed would allow inflation to overshoot its inflation target of 2.0%. This significant shift in policy means that interest rates will likely stay very low for the foreseeable future. This resulted in broad losses for the US dollar last week.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

108.52 (mentioned last week) has provided resistance since early June.

107.18 is next.

106.44 remains relevant.

105.45 is an immediate resistance line.

104.50 is the first line of support.

103.52 has held in support since mid-March.

102.27 is the final support level for now.

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USD/JPY Daily Chart

USD/JPY Sentiment

I remain neutral on USD/JPY

Both the dollar and the yen have struggled, despite their status as safe-haven assets. With the US Congress deadlocked over a stimulus package and the Japanese economy limping along, it could be a quiet week for the pair.

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About Author

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.

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