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USD/JPY  ticked higher in the range despite US dollar weakness. All in all, no big moves were recorded. The main event this week is the release of inflation numbers.  Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

Japan’s trade balance surprised with a smaller than expected deficit: only 0.86 trillion yen. On the other hand, Koruda did not show any signs that the monetary blitz, aka the QQE program, is going away anytime soon. In the US, the FOMC tapered as expected, but more importantly maintained the dovish tone. A rate hike will not be brought forward, it seems for now.

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USD/JPY graph with support and resistance lines on it. Click to enlarge:

USDJPY June 23 27 2014 technical analysis fundamental outlook and sentiment

  1. Flash Manufacturing PMI: Monday, 1:35. Markit’s  purchasing managers’ index for Japan slipped just below growth territory in May, hitting 49.9 points according to the initial release. In June, a slight uptick back up above the critical 50 point mark.
  2. CSPI: Tuesday, 23:50. The  Corporate Services Price Index is yet another measure of inflation, as it reflects the prices of services purchased by corporations.  After a surprisingly strong rise of 3.4% in April (due to the sales tax hike), a lower year over year rise of 3.2% is expected.
  3. Haruhiko Kuroda talks:  Monday, 6:00. The governor of the Bank of Japan speaks in Tokyo and will probably try to keep all the doors open for new policy measures. On one hand, he would like to maintain a low value of the yen to support achieving the 2% inflation goal. On the other hand, this is hard if he doesn’t  leave markets believing that more action is still on the cards. Any talk of exit strategy could  boost the yen.
  4. Inflation data: Thursday, 23:30.  Inflation numbers have jumped in April, but this was no surprise after the  hike of the sales tax. And now, we get initial numbers for June from Tokyo. These are expected to show an annual level of inflation standing at 2.8%, as in May. On the national level, data is released for May, and here a rise of 3.4% is expected after 3.2% in April. While these numbers easily surpass the target, the BOJ deduces the effect of the tax hike and still sees inflation below target.
  5. Household Spending:  Thursday, 23:30. This measure of consumption jumped in March by 7.2%, reflecting the pre-hike shopping, and dropped sharply by 4.6% in April. Another fall is expected now, by 1.9%. For June, we might already get more stable year over year numbers, after the shock is fully gone.
  6. Unemployment Rate: Thursday, 23:30. Japan’s unemployment rate fell to only 3.6% back in February, and remained at this low level since then. While this is of envy to many countries, the release will likely be overshadowed by inflation numbers.
  7. Retail Sales: Thursday, 23:50. Similar to household spending, also the volume of retail sales jumped in March and dropped in April, by a sharp 4.3%. And also here, a slide of 1.9% is predicted now.

* All times are GMT

USD/JPY Technical Analysis

Dollar/yen started the week with a rise back above 102, mentioned last week. It battled with this level throughout the week and managed to end the week higher.

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

Technical lines from top to bottom

104.80 capped the pair during January and with current ranges, looks distant. 104.10, the high of April 2014 is currently a minor line, but should be watched.

Below, 103.77 provided support for the pair in January and served as a clear separator of ranges.  102.80  was a stubborn peak during February and is the top line of the current trading range.

102.00 is a round number that supported the pair several times and is  now the pivotal line within the narrowing trading range.

101.30  provided strong support for the pair during May  2014 and is the low line of support. 100.75 prevented the pair from falling lower during February and is the last backstop before the round number of 100.

100 is not just a round number but also worked as resistance several times in the past.

I am neutral  on USD/JPY

The pair seems to be experiencing an “ugly battle” that maintains its range. In the longer run, the USD is expected to gain, as the Fed is  approaching an exit, yet that exit is not so close. The Bank of Japan is also not going anywhere fast. For those

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