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USD/JPY  was almost unchanged at week’s end. The pair  closed  slightly above the 110 level.  There are 10 events on the schedule this week. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

US indicators were mixed last week.  Housing  numbers  beat expectations  but durable goods orders was weak. GDP  posted a lukewarm  gain of 0.8%.  Fed Chair Yellen kept the door open to  a June  rate hike. In Japan, inflation levels remain very weak, as Tokyo Core CPI posted a fifth straight decline.

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

USD_JPY Weekly Forecast-May 30-June3

  1. Retail Sales: Sunday, 23:50. The week kicks off with this key release. The indicator has been struggling, posting four declines in the past five months. In March, the indicator declined 1.1%, within expectations. Little change is expected in the April report.
  2. Household Spending: Monday, 23:30. Household Spending is an important consumer spending indicator. Consumer spending remains week, and the indicator has managed just one gain in the past seven releases. The indicator posted a decline of 5.3% in March, below expectations. Another decline is expected in April, with an estimate of -1.0%.
  3. Preliminary Industrial Production: Monday, 23:50.  The indicator has been alternating between gains and declines. In March, the indicator bounced back with a gain of 3.6%, above expectations. The markets are braced for a decline of 1.4% in the April report.
  4. Housing Starts: Tuesday, 5:00. This indicator provides a snapshot of the strength of the housing sector. The indicator posted a strong gain of 8.4% in March, crushing the estimate of -0.5%. Another gain is expected in April, with an estimate of 3.2%.
  5. Capital Spending: Tuesday, 23:50. This minor  indicator posted a strong gain of 8.5% in Q4 of 2105, within expectations. The estimate for Q1 stands at 1.9%.
  6. Final Manufacturing PMI: Wednesday, 2:00.  The PMI has posted two consecutive readings below the 50-level, which indicates contraction in the manufacturing sector.  In March, the index  dropped to 48.2 points, within expectations. The downward trend is expected to continue in April, with an estimate of 47.6 points.
  7. Monetary Base: Wednesday, 23:50. Monetary Base dipped in March to 26.8%, compared to an estimate of 29.3%. The forecast for the April report is 27.2%.
  8. 10-year Bond Auction: Thursday, 3:45. 10-year bonds continue to post negative returns, and the May yield dipped lower  to -0.10%. Will the downward trend continue in the June release?
  9. Consumer Confidence: Thursday, 5:00. Consumer Confidence remains at low levels, with readings close to the 40-point level. The indicator dropped to 40.8 points in March, matching the forecast. The downward trend is expected to continue in April, with the estimate standing at 40.4 points.
  10. Average Cash Earnings: Friday, 00:00. This minor event measures disposable income levels. In February, the indicator improved to 1.4%, well above the estimate of 0.6%. The forecast for March is +0.9%.

* All times are GMT

USD/JPY Technical Analysis

USD/JPY opened the week at 110.03  and quickly touched a  low of 109.08. The pair then reversed directions and  climbed to a high of 110.45, as 110.94 held firm in resistance (discussed last week). USD/JPY closed the week at 110.15.

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

Technical lines from top to bottom:

We start with  resistance at  114.55.

113.51 is the next line of resistance.

112.41 was a cushion in the first half of 2014.

111.74 is next.

110.94  was an important support level in  February.

109.90 was a cap for much of April.

108.95 was a cushion in May 2006.

107.39 is a strong support line.

106.25 marked the start of a dollar rally in October 2014 which saw USD/JPY move above the 121 line. It is the final support line for now.

I am bullish on USD/JPY

A rate hike in June by the Fed remains on the table, although a July move is more likely. With the BoJ under pressure to increase monetary easing, monetary divergence could push the yen to lower levels.

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