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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.

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

Key news updates for USD/JPY



USD/JPY Technical Analysis

We start with resistance at 112.25, which has held firm since December 2018.

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

109.73 has switched to a resistance role after losses by USD/JPY last week.

108.70 is an immediate resistance line.

108.10 is under pressure in support. It last saw action in the first week in January.

107.30 (mentioned last week) has provided support since October 2019. 106.61 is next.

105.55 is the final support level for now.


USD/JPY Daily Chart

USD/JPY Sentiment

I remain bearish on USD/JPY

The China coronavirus continues to spread and claim lives, and investors remain very concerned. Risk appetite has fallen and investors have snapped up safe-haven investments such as the Japanese yen. With no signs that the outbreak will soon be contained, the yen rally could continue.

Safe trading!