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Dollar/yen posted strong gains last week, climbing 1.6 percent. Investors will be keeping an eye on Japanese GDP for Q1. The economy contracted by 1.8% in Q4 of 2020, and a decline of 0.5% is projected for Q1. In the U.S., consumer inflation is expected to improve to 0.0%, after back-to-back declines. As well, the FOMC will set the benchmark rate at its monthly policy meeting.

USD/JPY fundamental mover

Japanese capital spending rebounded nicely in Q1, with a gain of 4.3 percent. The indicator declined by 3.5 percent beforehand. At the same time, consumer spending continues to fall. Household spending declined by 11.1 percent in April, after a drop of 6.0 percent a month earlier. This dismal figure was the fastest decline on record, as consumers have put a tight clamp on spending.

In the U.S., ISM Manufacturing PMI improved to 43.1, up from 41.1 beforehand. The PMI has indicated contraction for three straight months, as the manufacturing sector has been hit hard by the economic crisis. The services sector also finds itself in contraction territory, as the ISM Non-Manufacturing PMI came in at 45.4 in May within expectations. Nonfarm payrolls shocked with a huge gain of 2.5 million in May, defying the estimate of -7.7 million. In April, the economy shed a staggering 20.5 million jobs. The unemployment rate fell to 13.3%, down from 14.7% beforehand. The forecast stood at 19.4 percent.

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 gains last week, we start with resistance at higher levels:

113.15 was a swing high back in July.

112.25 has held in resistance since December 2018.

111.69 (mentioned last week) is next.

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 is providing support.

108.10 last saw action in the first week in January.

107.30 has some breathing room after USD/JPY posted strong gains last week.

106.61 is the final support level for now.


USD/JPY Daily Chart


USD/JPY Sentiment

I am neutral on USD/JPY

USD/JPY has been relatively steady in recent weeks; last week’s gain of 1.6% was the strongest move since late March. Both the dollar and the yen are viewed as safe-haven currencies, so last week’s volatility could ease.

Safe Trading!