The Japanese yen gained about 70 points this week, as the pair closed at 101.66. There are seven events on this week’s schedule. Here is an outlook for the highlights of this week and an updated technical analysis for USD/JPY.
The yen posted strong gains after the Japanese cabinet approved Prime Minister Abe’s JPY 28 trillion stimulus package. There was excellent news from the US labor markets, as Nonfarm Payrolls gained 255K jobs and wage growth also improved.
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USD/JPY graph with support and resistance lines on it. Click to enlarge:
- Current Account: Sunday, 23:50. The current account surplus narrowed to JPY 1.41 trillion in May, short of the estimate. The indicator is expected to rebound in June, with an estimate of JPY 1.60 trillion.
- Economy Watchers Sentiment: Monday, 5:00. This consumer indicator continues to lose ground and dipped to 41.2 points in June, missing expectations. The markets are expecting better news in July, with an estimate of 42.6 points.
- M2 Money Stock: Monday, 23:50. This indicator has been steady, posting two straight readings of 3.4%. Little change is expected in the July release.
- 30-year Bond Auction: Tuesday, 3:45. 30-year bonds remain above zero, although that could soon change, as yields have been pointing downwards. The indicator dipped to just 0.12% in the July auction.
- Preliminary Machine Tool Orders: Tuesday, 6:00. This manufacturing indicator continues to post sharp declines. The June reading came in at -19.9% and the negative trend will likely continue in the July release.
- Core Machinery Orders: Tuesday, 19:50. The indicator has posted three declines in the past four readings, pointing to weakness in the manufacturing sector. The markets are expecting a strong gain in the June reading, with an estimate of 3.4%.
- Tertiary Industry Activity: Wednesday, 4:30. This business spending indicator reversed directions in May, declining 0.7%. The indicator is expected to reverse directions in June, with an estimate of 0.3%.
* All times are GMT
USD/JPY Technical Analysis
USD/JPY opened the week at 102.33 and touched a high of 102.83 early in the week. This tested resistance at 102.80 (discussed last week). The pair then reversed directions and dropped to a low of 100.66. USD/JPY gained ground late in the week and closed at 101.66.
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
Technical lines from top to bottom:
With USD/JPY posting sharp losses, we begin at lower levels:
106.25 is a strong resistance line.
105.19 was a cushion in October 2014.
104.25 is next.
102.80 has strengthened in resistance.
101.51 is providing weak support. This line could see further action early in the week.
99.98 is next.
98.95 has held in support since late June.
97.61 was last tested in November 2013. It is the final support level for now.
I am neutral on USD/JPY
The superb payrolls report will likely raise the odds of a rate hike by the Fed before the end of the year, which is bullish for the dollar. At the same time, with the BOJ shying away from any monetary easing, the yen could move higher.
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Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Canadian dollar (loonie), check out the Canadian dollar forecast.
- For the kiwi, see the NZD/USD forecast