USD/JPY Forecast Jan. 25-29

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USD/JPY surged last week, gaining 180 points. The pair closed at 118.77. 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.

US numbers were not strong last week, but the US dollar still racked up strong gains. US inflation levels didn’t shine, but managed to meet expectations. US Unemployment Claims shot higher, hitting its highest level in 11 months. There were no major Japanese releases last week.

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

USDJPY_ Daily Chart Jan 25-29

  1. Trade Balance: Sunday, 23:50. 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. SPPI: 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. Retail Sales: Wednesday, 23:50. 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. Household Spending: Thursday, 23:30. 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. Tokyo Core CPI: Thursday, 23:30. 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. Preliminary Industrial Production: Thursday, 23:50. 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%.
  7. BOJ Monetary Policy Statement: Friday, Tentative. The BOJ is under pressure to implement further easing to kick-start the limping Japanese economy. The statement will be accompanied by an Outlook Report and press conference, so we could see some volatility from USD/JPY following these events.

* All times are GMT

Live chart of USD/JPY:


USD/JPY Technical Analysis

USD/JPY opened the week at 117.00 and touched a low of 115.96, as support held at 115.90 (discussed last week).  The pair then reversed directions and climbed all the way to 118.77. USD/JPY closed the week at 118.77.

Technical lines from top to bottom::

We start with resistance at 122.49. This line was an important cap in December.

121.50 is next.

120.47 marked the highpoint of a yen rally at the start of January, which saw the pair drop below the 117 line.

119.19 is the next resistance line.

118.50 was breached and has switched to a support role following the pair’s strong gains. It is a weak line.

116.90 supported dollar/yen early in 2015.

115.90 held firm as the pair posted losses before recovering. It has provided support since August 2015.

114.65 is the final support level for now.

I am neutral on USD/JPY

The Federal Reserve may not raise rates for a while, following weak employment and inflation numbers last week. The yen has benefited in early 2016, from risk-averse investors, but the BOJ is under strong pressure to increase monetary easing, and any such steps would likely weaken the yen.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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