USD/JPY Forecast July 1-5 – A quiet week for yen, but Gulf tensions bubbling below surface

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Dollar/yen posted modest gains last week, after sustaining sharp losses a week earlier. Investors will be keeping an eye on the Tankan indices and household spending. If these releases are stronger than expected, the yen could gain ground.

USD/JPY fundamental movers

The Persian Gulf remains a geopolitical hotspot, as tensions have been high since Iran shot down a  U.S. drone last month. Another clash between Iran and the U.S. could raise risk apprehension, which would benefit the safe-haven Japanese yen. At the G-20 summit in Japan, the U.S and China agreed to resume trade talks, but both sides remain entrenched in their positions and the tariffs remain in place.

In the U.S., the week was marked by mixed numbers. CB Consumer Confidence dropped to 121.5 in June, down sharply from 131.3 in May. This marked its lowest level since September 2017. First-quarter GDP was unrevised in the second estimate, with a strong gain of 3.1%. Durable goods orders disappointed with a decline of 1.3%, its third decline in four months. There was no movement from the Core PCE Price Index, the Federal Reserve’s favorite inflation gauge. The indicator remained stuck at 0.2%.

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Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

111.69 was the high point of the yen rally in the first half of May. 111.15 follows.

110.40 (mentioned last week), is the next resistance line.

109.73 has held in resistance since the end of May.

109.35 is the next resistance line.

108.70 has some breathing room after sharp losses by USD/JPY late in the week.

108.10 was tested in resistance late in the week. This line was a swing low in late May.

107.50 has switched to a support role after gains by USD/JPY. It capped the pair in early April. 106.61 is next.

105.55 has held in support since early January.

104.65 is the final support level for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I remain bearish on USD/JPY

Tensions in the Persian Gulf remain high, and any new developments could shake up the yen. The U.S. will release nonfarm payrolls at the end of the week, and traders should treat this event as a market-mover.

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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.