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USD/JPY  posted modest losses last week,  as the pair  closed slightly below the 120 level. The upcoming week is a quiet  one, with just  five events.  Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

The yen was the only major currency that failed to post gains against the dollar following the release of the Fed minutes. Japanese releases were mixed, as Current Account  beat the estimate, but Core Machinery Orders posted a sharp decline  and missed expectations. In the  US,  Services PMI and Trade Balance were weaker than expected.  There was better news on the  employment front, as  unemployment claims easily beat the estimate.

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

USD_JPY_Forecast.Oct 5-9

  1. BOJ Monetary Policy Meeting Minutes: Monday, 23:50. The BOJ minutes will provide details about last week’s monetary statement, in which the BOJ stated that it was not changing its monetary course. Still, given the weak economy and feeble inflation levels, there is pressure on the BOJ to increase easing, so any hints in that regard in the minutes could push the yen lower.
  2. Consumer Confidence: Tuesday, 5:00. Consumer confidence is closely watched as the stronger consumer confidence usually translates into increased consumer spending, which is a key driver of economic growth. Given the weak economy, it comes as no surprise that the indicator continues to churn out readings below the 50-level, which indicates pessimism on the part of the Japanese consumer. The indicator improved slightly in August, posting a reading of 41.6 points.
  3. Preliminary Machine Tool Orders: Tuesday, 6:00. This indicator  has been losing ground in recent months, and posted a sharp decline of 16.5% in  August. Will we see any improvement in the September report?
  4. PPI: Tuesday, 23:50. This manufacturing inflation  index has been posting declines in the second half of 2015, and  posted a sharp decline of 3.2% in  August, which was below  expectations.  The markets are bracing for an even  sharper decline in the September report, with a  forecast of 3.9%.
  5. Revised Industrial Production: Thursday, 4:30. There was no relief from this manufacturing indicator, which reversed directions in July and posted a decline of 0.8%, which was within expectations. The markets are expecting another decline in August, with the estimate standing at -0.5%.

* All times are GMT

USD/JPY Technical Analysis

USD/JPY  opened the week at 120.39. The pair  quickly touched a  high of 120.47, and then reversed directions, slipping to a low of 118.68, as support held firm at 118.50 (discussed last week). USD/JPY closed the week at 119.86.

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

Technical lines from top to bottom:

We start with a top level at the round number of 125.

Another round number, 123, was a swing low in July and remains of importance. 121.50 is  the high in September and importance resistance.

120.40, which  was a swing low in July, defends the round level of 120.

118.50 is the next key level after working as such during the spring and also lately.

116.90 supported dollar/yen early in the year.

115.90 is the final support level for now.

I am  bullish  on USD/JPY

The US dollar was broadly weaker last week but still held its own against the yen. With the BOJ looking at expanding its easing program  in order to kick-start the sputtering Japanese economy, monetary divergence clearly favors the US and could boost the dollar.

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