USD/JPY Forecast Feb. 4-8 – Yen continues to drift as BoJ stands pat

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Dollar/yen was almost unchanged for a second straight week. Will the lack of activity continue? Traders should keep an eye on Japanese consumer events in the upcoming week – household spending and Average Cash Earnings.           

USD/JPY fundamental movers

The BoJ released the minutes from the BoJ meeting, with a message of “more of the same”. The bank stated that it would maintain its ultra-accommodative policy “for an extended period of time”. Lawmakers also expressed concern over the slowdown in the Chinese economy its negative impact on the Japanese economy. Other members expressed concern over weak inflation, which remains well below the bank’s inflation target of around 2 percent.

The U.S-China trade war has weighed on Japan’s economy, and if the crisis continues, the economy could tip into recession. The key export sector is hurting, as exports fell in December to their lowest level in two years. However, there is some optimism as the U.S. and China concluded a second round of trade talks last week. The ongoing talks have raised hopes that the U.S. will not impose further tariffs on March 1.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

We start at 112.73, which 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 is next. Below, 109.70 was a swing low in late August and is protecting the symbolic 110 level.

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.

105.66 was tested earlier in January as the pair dropped sharply.

USD/JPY Daily Chart

USD/JPY Sentiment

I am neutral on USD/JPY

Investors remain somewhat cautious, which has kept the safe-haven yen subdued. The markets have digested that the Fed will likely ease up on monetary policy in 2019, which weighed on the greenback in January. The global trade war continues and investors are waiting to see if tensions between the U.S. and China will ease after a second round of talks last week.

Our latest podcast is titled: Are markets too optimistic on the Fed, China, and Brexit?

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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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