USD/JPY Forecast Feb. 1-5

The US dollar continues to hammer the yen, as USD/JPY jumped 260 points last week. The pair closed at 121.14, marking a 6-week high. The upcoming week has  eight  events. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

The  Federal  Reserve  was  dovish in  its  January policy statement, lowering the chances of a hike in March, and US durables looked  dismal last week. The BOJ shocked the markets by adopting negative interest rates. This sent the yen tumbling late in the week.

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USD/JPY graph with support and resistance lines on it:

1. Final Manufacturing PMI: Monday, 2:00. Japanese Trade Balance improved to 0.00 trillion yen in November, breaking a long streak of deficits. Will we see a surplus in December? The markets appear to think so, with an estimate of 0.08 trillion yen.
2. Monetary Base: Monday, 23:50. SPPI measures inflation in the corporate sector. The index dipped to 0.2% in November, short of the estimate of 0.4%. The estimate for December is 0.2%.
3. 10-year Bond Auction: Tuesday, 3:45. Retail  Sales is the primary gauge of consumer spending, and an unexpected reading can have a strong impact on the movement of USD/JPY. The indicator slipped 1.0% in November, its second decline in three readings. The forecast for the December report is 0.2%.
4. BOJ Governor Haruhiko Kuroda Speaks: Wednesday, 4:30. This important consumer indicator continues to struggle, and has posted just one gain in the second half of 2015. The November reading dipped to -2.9%, well below the forecast of -2.1%. Another decline is expected, with an estimate of -2.3%.
5. Consumer Confidence: Wednesday, 5:00. Tokyo Core  is the most important Japanese inflation indicator, and is closely watched by the markets. The index posted a small gain of 0.1% in December, matching expectations. Another gain of 0.1% is predicted for the January report.
6. Leading Indicators: Friday, 5:00. The indicator came in at -1.0% in November, compared to the forecast of -0.4%. Another decline is expected in December, with an estimate of -0.3%.

* All times are GMT

Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]

USD/JPY Technical Analysis

USD/JPY opened the week at 118.65 and  quickly touched a low of  117.65. The pair then reversed directions and  climbed all the way to 121.69, testing resistance at 121.50. USD/JPY closed the week at 121.14.

Technical lines from top to bottom:

With the pair posting strong gains last week, we start at higher levels:

We start with resistance at 125.28.

123.75 was a cap in November.

122.49 is next.

121.50 marked the high point of a yen rally in December which saw USD/JPY drop to the 117 line. It was tested last week.

120.47 has switched to a support role following strong gains by the pair.

119.19 was easily breached as the yen posted sharp losses last week.

118.50 has strengthened in support.

116.90 supported dollar/yen early in 2015. It is the final support line for now.

I  am  bullish on USD/JPY

The BoJ surprised the markets by cutting rates into negative territory, in an attempt to kick-start the weak  Japanese  economy. The yen took a beating late in the week and this trend could continue.  As expected, the  Federal Reserve  did not raise rates last week, so the markets will be  looking for clues regarding a rate hike in March.

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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 Australian dollar (Aussie), check out the AUD to USD forecast.
• For the kiwi, see the NZDUSD forecast.