USD/JPY Forecast Feb. 25-March 1 – Yen drifting continues

Dollar/yen had an uneventful week, as the pair showed slight gains. Risk appetite remains strong as trade talks between the U.S and China have picked up steam. Still, the safe-haven yen managed to hold its own last week.

USD/JPY fundamental movers

Japanese manufacturing numbers continue to struggle, as the slowdown in China has dampened appetite for Japanese exports. Core Machinery Orders declined 0.1% in December, after a flat reading of 0.0% a month earlier. Manufacturing PMI slipped to 48.5, pointing to contraction for the first time since April 2016.

Talks between China and the U.S. have been extended, raising hopes that the parties are on the path to reaching an agreement. The talks are reportedly making progress, as negotiators are preparing memorandums of understanding on key issues such as cyber theft and intellectual property rights. Investors are hopeful that a March 1 deadline of higher U.S tariffs can be avoided. The trade war between the two countries has weighed heavily on global growth, and an agreement could raise risk appetite and weigh on the safe-haven yen.

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Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

It was a quiet week for USD/JPY, which was marked by range-trade.

114.25 was the high point in November. 114 is a round number and was a stepping stone on the way down. Close by, 113.80 was a resistance line in November.

113.15 was a swing high back in July. 112.25 provided support in early December and it defends the 112 level.

112.73 was an important resistance line in October.

112.25 provided support in early December and it defends the 112 level.

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

110.40 (mentioned last week) held in support.

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. It is the final line for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am neutral on USD/JPY

The yen has showed limited movement since mid-January, and this trend could continue this week. The U.S-China trade war has weighed on the global economy, and investors are keeping an eye as talks continue. Another factor which could affect the movement of the pair will be the testimony of Fed Chair Jerome Powell before Congress this week.

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