Dollar/yen had another up week, getting close to 110, rising on US yields and also optimism after the Korean Summit. After the late dip, will it continue higher? A busy week features the Fed and a buildup to the NFP.
USD/JPY fundamental movers
Yields, US GDP, Korea, the BOJ
US 10-year Treasuries finally crossed the 3% mark that was long awaited. Despite the retreat from those levels, the US Dollar certainly took advantage and moved higher across the board.
Data remained upbeat with Q1 GDP coming out slightly above expectations at 2.3%, slower than in Q4 but above the low levels typical to the first quarter. Other figures were also OK.
In Japan, the BOJ left its policy unchanged but abandoned the aim to reach 2% core inflation in the Fiscal Year 2019. This only caused confusion but no significant market movements.
A bigger event was the Korean Summit. The leaders of North and South Korea met at the border and vowed to denuclearize the peninsula and reach a peace treaty. This lowered the demand for the safe-haven yen.
Fed and NFP buildup
The Fed convenes on Wednesday and is unlikely to change the interest rates. There is no press conference nor new forecasts. Nevertheless, the event is closely watched and will likely cement a rate hike in June.
Data-wise, the week is packed. The Core PCE on Monday is expected to rise, pushing inflation closer to the Fed’s 2% target. Hints for the NFP are due from the ISM figures and also the ADP NFP. And on Friday, the Non-Farm Payrolls report is expected to show a return to around 200K jobs gained. More importantly, wages are expected to remain at 2.7% y/y. Any move to either direction will have an important impact on the US Dollar.
In Japan, Prime Minister Shinzo Abe continues struggling with dwindling popularity and a potential internal rebellion within his party.
See all the main events in the Forex Weekly Outlook
Key news updates for USD/JPYUpdates:
USD/JPY Technical Analysis
112.20 supported the pair back in December. It is followed by 111.50 that capped the pair in January.
Further down, 110.50 was a swing high in February. The round number of 110 serves as a psychological level. 109.50 held the pair back in late April.
109 was a pivotal line within the range. 108.30 was the low seen in late January. Even lower, we find 107.50 capped the pair in early April and is a strong line.
106.50 was a resistance line in mid-February. and then resistance in early March. 105.55 was the first swing low.
USD/JPY Daily Chart
I am neutral on USD/JPY
While the pair may continue rising, it may take an extended breather. If Abe faces further pressure, the yen could rise.
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