USD/JPY Forecast Mar. 20-24

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The Japanese yen reversed directions and gained 220 points last week. USD/JPY closed at 112.58, its lowest weekly close since late February. There are just three events this weekHere is an outlook for the highlights of this week and an updated technical analysis for USD/JPY.

As expected, the Fed pressed the rate trigger and raised rates to the 0.75%-1.00% range. This led to broad losses by the US dollar (here are 5 reasons why the dollar dropped). Consumer inflation and retail sales were soft but within expectations. In Japan, the BoJ stood pat and held rates at -0.10%.

Updates:

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

  1. BoJ Monetary Policy Meeting Minutes: Tuesday, 23:50. The BoJ will release the minutes from the January monetary policy statement. Analysts will be looking for clues regarding the central bank’s future monetary policy.
  2. All Industries Activity: Wednesday, 4:30. The indicator provides a snapshot of the level of activity in the business sector. In December, the indicator disappointed with a decline of 0.3%, missing the estimate of -0.2%. The markets are expecting a stronger reading in January, with an estimate of 0.1%.
  3. Japanese Flash Manufacturing PMI: Friday, 00:30. The chronically weak manufacturing sector has shown signs of improvement, underscored by the PMI, which has strengthened over three straight months. The index improved to 53.5 in February, pointing to expansion. An identical reading is expected in the March reading.

USD/JPY opened the week at 114.76 and climbed to a high of 115.19. It was all downhill from there, as the pair plunged to a low of 112.90, as 112.53 held in support (discussed last week). USD/JPY closed the week at 112.58.

Live chart of USD/JPY:

Technical lines from top to bottom:

We start with resistance at 116.88.

115.90 is next.

114.63 has switched to resistance. It was a cushion in December 2016 and January 2017.

112.53 is providing support. It is a weak line and could see further action early in the week.

110.83 is next.

109.18 marked the start of a rally in September 2008 which saw USD/JPY drop close to the 0.87 level. It is the final support line for now.

I am neutral on USD/JPY

The Fed raised rates last week but sounded more dovish than the markets would have liked. Still, the US economy is performing well and employment and consumer confidence numbers remain strong.

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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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