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Dollar/yen continues to show strong volatility. The pair declined by two percent last week, as the yen recovered from losses in the previous week. The Bank of Japan releases its policy statement, while the U.S. will publish retail sales. As well, Fed Chair Jerome Powell will testify before two congressional committees in the upcoming week.

USD/JPY fundamental mover

In Japan, GDP for the first quarter contracted by 2.2%. This was a second straight contraction, which means that the economy is officially in recession. Still, the decline was smaller than the initial read of -3.4 percent, which helped the yen gain ground last week. The country’s current account surplus narrowed to 0.25 trillion yen, down sharply from 0.94 trillion yen beforehand. This marked the smallest surplus since 2014. As well, the Business Survey Index sank to -54, indicative of deep pessimism in the manufacturing sector.

In the U.S., consumer inflation posted a third consecutive decline, as the weak U.S. economy is not generating any inflation. Both the headline and core figures came in at -0.1%. The Fed made no change to the benchmark rate and indicated that it has no plans to alter rates from their ultra-low levels prior to 2022. Producer Price Inflation numbers were a mix. The headline read gained 0.4%, while the core figure fell by 0.1 percent. Unemployment claims continue to ease, falling to 1.54 million last week, down from 1.87 million beforehand.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY


USD/JPY Technical Analysis

With USD/JPY posting strong losses last week, we start with support at higher levels:

110.62 switched to resistance in late March, when USD/JPY dropped sharply.

109.73 is protecting the 110 level, which has psychological significance.

108.70 (mentioned last week) has switched to a resistance line after sharp gains by USD/JPY last week.

108.10 last saw action in the first week in January.

107.30 is an immediate support line.

106.61 is next.

105.55 has held in support since mid-March.

104.65 follows.

The round number of 104 was a key line in May 2008.


USD/JPY Daily Chart


USD/JPY Sentiment

I am neutral on USD/JPY

USD/JPY has shown uncharacteristic volatility in recent weeks. Last week’s drop of 1.6% was the strongest move since late March. Given the uncertain economic conditions which have impacted on the global economy, further volatility this week cannot be ruled out.

Safe Trading!