USD/JPY fundamental movers
The BoJ minutes from the April meeting indicated that the policymakers intend to stick to their ultra-accommodative policy. At the meeting, members stated that the bank’s forward guidance for policy rates, saying that they would keep short and long-term interest rates at very low levels “at least though around spring 2020”. Members also acknowledged that it would take time for inflation to reach the BoJ’s target of around 2 percent.
The safe-haven yen received a boost last week as trade tensions escalated between the U.S. and China. President Donald Trump made good on his tariff threat, as the U.S. raised tariffs on $200 billion worth of Chinese goods on Friday, from 10% to 25%. Trump announced the move on the previous Sunday, which sent shock waves across equity markets during the week.
In the U.S, the focus was on inflation. The producer price index slowed to 0.2% in April, down from 0.6% a month earlier. The core release also lost ground, dropping from 0.3% to 0.1%. This was followed by consumer inflation reports. CPI dropped from 0.4% to 0.3%, shy of the estimate of 0.4%. The core release remained stuck at 0.1%, short of the estimate of 0.2%.
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USD/JPY Technical Analysis
With USD/JPY posting sharp losses last week, we start at lower levels:
114.25 was the high point in November. Close by, 113.80 was a resistance line in November.
113.15 was a swing high back in July.
112.73 was an important resistance line in October.
112.25 has held in resistance since December.
111.69 was the high point of the current slide which started in early May. 111.15 follows.
Early in the week, the pair broke through support at 110.40 (mentioned last week).
109.73 was tested late in the week. It starts the week as a weak support line.
Close by, 109.35 was a cushion in mid-July.
108.70 was a cushion early in the summer and 108.10 was a swing low in late May.
107.50 capped the pair in early April.
106.61 is the final support level for now.
USD/JPY Daily Chart
I am neutral on USD/JPY
The U.S. economy continues to outperform its Japanese counterpart, but investors favored the yen last week. With the Federal Reserve keeping all options on the table, a rate hike remains a possibility. However, if trade tensions continue between the U.S, and China, the safe-haven yen could remain attractive to investors.