USD/JPY Forecast July 22-26 – Yen drifting, investors eye U.S. GDP

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Dollar/yen continues to have a quiet summer, as the pair posted small gains last week. Will the lack of activity continue? Japan will release inflation indicators in the upcoming week, while the key events in the U.S. are durable goods orders and U.S. Advance GDP for the second quarter.

USD/JPY fundamental movers

Japanese inflation remains soft, as the BoJ inflation target of around 2.0% remains elusive, and perhaps unattainable. National Core CPI, a key inflation gauge, slowed to 0.6% in June, its lowest level since July 2017. Weak inflation levels are increasing pressure on the BoJ to ratchet up its stimulus, but there’s not much left in the BoJ toolbox.

In the U.S., the economy continues to perform nicely. Retail sales ticked lower to 0.4% in June, down from 0.5%. Still, this was above the forecast of 0.1%. The numbers were identical for the core reading. There was positive news from manufacturing. The Empire State Manufacturing Index climbed to 4.3 in July, up from -8.6 a month earlier. The Philly Fed Manufacturing Index jumped to 21.8, its highest level in 9 months. The week ended up with UoM Consumer Sentiment, which climbed to 98.4 in July, up from 97.9 a month earlier.

See all the main events in the Forex Weekly Outlook

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 close by.

108.70 was last tested in mid-June.

108.10 remained relevant last week. This line was a swing low in late May.

107.50 saw action late in the week. Currently, this line is a weak support level. 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 neutral on USD/JPY

The Fed is widely expected to lower rates at the policy meeting in late July, but the downward impact on the greenback will likely be limited, as markets have had plenty of time to price in the move. With tensions in the Persian Gulf still high, further confrontations between Iran and the U.S. and its allies could shake up the markets and boost the safe-haven Japanese yen.

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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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