USD/JPY Forecast Dec. 30-Jan. 3 – Weak inflation, Retail Sales Weigh on Japanese Economy

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After strong swings in recent weeks, Dollar/yen showed limited movement in the abbreviated Christmas week. With Japan observing a bank holiday throughout the week, it could be a quiet week for USD/JPY. 

USD/JPY fundamental movers

The Bank of Japan’s preferred inflation indicator, BOJ Core CPI, dipped to 0.2%, down from 0.3% a month earlier. Retail sales fell by 2.1% in November, marking a second straight decline. Consumer spending has been dampened by a higher sales tax, which was raised from 8% to 10%.

In the U.S. the only key events, durable goods reports, missed their estimates by a wide margin. Durable goods orders plunged 2.0% in November, compared to a gain of 0.6% a month earlier. This was shy of the estimate of +0.2%. The core release, which excludes volatile items such as aircraft orders, slowed to 0.0%, down from 0.6% in October. This figure was well off the estimate of a 1.5% gain. The soft durables reports indicate that the manufacturing sector is showing signs of weakness. On the employment front, unemployment claims dropped sharply for a second straight week, to 222 thousand. This matched the estimate.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

We start with resistance at 112.25.

111.62 has held in resistance since April. 110.62 is next.

109.73 remains an immediate resistance line.

109.35 is under pressure in support. 108.70 is next.

108.10 is protecting the round number of 108.

107.30 (mentioned last week) switched to support in early October.

106.61 is next.

105.55 has held in support since late August. It is the final support level for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I remain bullish on USD/JPY

Risk appetite remains strong, supported by the recent trade deal reached between the U.S. and China. This has boosted equity markets and could weigh on the safe-haven yen.

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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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