Dollar/yen traded slightly lower in the final week of 2017, sliding together with the general weakness of the US dollar. However, it never fell out of range. Will we see fireworks in 2018? The year begins with the US Non-Farm Payrolls, and that is a promising start.
USD/JPY fundamental movers
End-of-year dollar sell-off
The US dollar was on the back foot. It was an extension of the “sell the fact” reaction to the signing of the tax bill and also some portfolio adjustment. The yen was not the big winner, but it also took advantage of this.
US data didn’t help: CB Consumer confidence slipped to 122.1 points, jobless claims remained unchanged at 245K, and the trade balance deficit remained wide. Only pending home sales stood out with a small rise of 0.2%.
In Japan, we learned that industrial output rose by 0.6%, better than expected. Retail sales leaped by 2.2%, easily exceeding expectations.
NFP, FOMC meeting minutes, and a return from the vacation
The new year begins with a bang: the Non-Farm Payrolls receive a nearly full buildup (except the ISM Non-Manufacturing PMI which is released afterward). In addition, the Fed minutes may reveal if any additional members opposed the rate hike in addition to the two voters that dissented. If low inflation persists, it could hurt the dollar.
See all the main events in the Forex Weekly Outlook
Key news updates for USD/JPYUpdates:
- Jan 12, 14:39: US core CPI beats with 1.8% – good enough for the dollar? Not necessarily: Core CPI is up 0.3% m/m and 1.8% y/y, both better than expected. Headline CPI missed with 0.1% m/m but...
- Jan 10, 23:33: Scope For Further JPY Strength Towards 110 After BoJ’s Move – BTMU: The Bank of Japan triggered a “mini taper tantrum” with its tests. In addition, the news about China’s intention to...
- Jan 10, 12:00: USD crashes on report that China will halt buying US bonds – updates on 5 pairs: According to a report by Bloomberg, China is considering a halt or at least a slowdown in buying US treasuries....
- Jan 9, 8:58: USD/JPY suffers a minor taper tantrum – higher inflation needed for a lasting move: The Bank of Japan stands out among central banks in developed countries. They are on the extreme dovish end, buying...
- Jan 8, 12:13: Wages not winning, tax cuts to cut it? – MM #169: It’s 2018 and we are back to business. We begin with digesting the fresh jobs report and move to the...
USD/JPY Technical Analysis
115.35 is an old line that served as support when the pair traded on higher ground. 114.50 is the cycle high last seen in early July. The pair got close to that level.
113.70 was a separator of ranges in June and a line of resistance in December. It caps the range. 112.90 served as support in December and is a pivotal line in the range.
112.20 used to be important in the past. It is closely followed by 111.70, which provided support back in October. The round level of 111 worked as a cushion to the pair in November.
Looking down, 110.70 was a separator of ranges in June and remains important. 109.60 was a gap line in late April, a gap that was never closed.
In June, the pair found support several times at 109.10 and this also works as support. Further below, the cycle low of 108.10 is of high importance.
USD/JPY Daily Chart
I am bearish on USD/JPY
The greenback may extend its falls into the new year, and USD/JPY has some catching up to do. If wages remain stuck at 2.5% y/y in the NFP report, it could weigh.
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