USD/JPY Forecast May 6-10 – Lack of momentum continues for yen

Dollar/yen posted slight losses last week, as the pair closed just above the 111 line. Japanese events tend not to have a significant effect on the pair, but investors will still keep an eye on the BoJ minutes of the March meeting. The U.S. releases key consumer reports late in the week.

USD/JPY fundamental movers

Is a U.S-China trade deal around the corner? Negotiations continue, but investors remain in the dark as to when a historic deal could be sealed. If there are clear signs that a deal is near, risk appetite will rise, which could weigh on the safe-haven Japanese yen.

U.S. employment numbers were mixed. Wage growth edged up to 0.2%, shy of the estimate of 0.3%. However, nonfarm payrolls sparkled, climbing to 263 thousand, up from 196 thousand a month earlier. The reading easily beat the forecast of 181 thousand.

In the U.S, the Federal Reserve stayed on the sidelines, maintaining the benchmark rate. The rate statement noted that inflation pressures are muted and that the FOMC would remain patient regarding future rate movements. Fed Chair Jerome Powell reinforced this stance at a follow-up press conference, saying “we don’t see a strong case for moving in either direction”. The Fed is already on record as saying it does not expect to raise rates before 2020, and with inflation levels persistently below the Fed’s target of 2.0%, the Fed can afford to continue its wait-and-see stance.

See all the main events in the  Forex Weekly Outlook

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

We start with resistance at 115.55. This line was a high point in the first half of 2017 and remains an upside target. 114.60 was the high point in early October and has held in resistance since then.

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.

111.65 (mentioned last  week) remains relevant. 111.40 is next.

The pair broke through support at 111.15 late in the week.

110.40 is next.

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.

USD/JPY Daily Chart

USD/JPY Sentiment

I remain bullish on USD/JPY

With the U.S. economy performing well, the yen will have a tough time attracting investors, unless risk appetite falls. The Japanese economy remains fragile, but the BoJ has indicated it does not intend to alter its monetary policy.

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