USD/JPY Forecast February 3-7 – China Virus Lifts Safe-Haven Yen

Dollar/yen recorded considerable losses last week, as the yen climbed to a 3-week high. The upcoming week features the Bank of Japan’s preferred inflation gauge, BoJ Core CPI, as well as Japanese retail sales.

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USD/JPY fundamental movers

On the inflation front, BoJ Core CPI, the bank’s preferred inflation gauge, improved to 0.3% in December, up from 0.2% a month earlier. Japanese retail sales have been in decline since the introduction of a new sales tax in October. Retail sales fell 2.6% in December, compared to a 2.1% in November. This marked a third straight decline.

In the U.S., it was a busy week. Durable goods orders jumped 2.4%, which was a 9-month high. However, the core release declined by 0.1%, shy of the estimate of 0.4%. The Federal Reserve maintained the benchmark rate, and Fed Chair Jerome Powell said that the “Fed is determined to avoid inflation persistently running below 2%.” This could be a hint of a rate hike in the next few months, which would be bullish for the U.S. dollar. Advance GDP for the fourth quarter came in at 2.1%, as expected. This was unchanged from the third-quarter figure.

See all the main events in the  Forex Weekly Outlook

111.62 has been a resistance line since April 2019. 110.62 is next.