USD/JPY Forecast Oct. 19-23

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  three events.  Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

The yen took advantage of some weak US numbers, highlighted by poor retail sales and weak manufacturing data. There were no surprises from the BOJ policy minutes, as the central bank maintained its aggressive easing program.

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

1. Trade Balance: Tuesday, 23:50. Japan’s trade deficit showed little movement in August, coming in at JPY -0.36 trillion, which was within expectations. The markets are expecting a smaller deficit in September, with an estimate of JPY -0.07 trillion.
2. All Industries Activity: Wednesday, 4:30. The indicator posted a small gain of 0.5% in July, which was within expectations. The markets are braced for a decline in the August reading, with an estimate of -0.1%.
3. Flash Manufacturing PMI: Friday, 1:35. In recent months, this PMI has hovered closed to the 50-level, which separates contraction from expansion. The indicator dipped in September to 50.9 points, shy of the estimate of 51.3 points. The estimate for the October report stands at 50.6 points.

* All times are GMT

USD/JPY Technical Analysis

USD/JPY  opened the week at 120.19. The pair  quickly touched a  high of 120.22, and then reversed directions, slipping to a low of 118.05, testing support at 118.50 (discussed last week). USD/JPY closed the week at 119.39.

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

Technical lines from top to bottom:

The round number of  123, was a swing low in July and remains of importance.

121.50 was  the high in September and a key resistance line.

120.40, which  was a swing low in July, has switched to resistance. It is a weak line.

118.50 is an immediate support level.

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 Fed may not make any moves until 2016, but monetary divergence will continue to favor the dollar, as the BOJ contemplates further easing to kick-start a limping economy, which continues to lag well behind the US economy.

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Further reading:

• For a broad view of all the week’s major events worldwide, read the USD outlook.
• For EUR/USD, check out the Euro to Dollar forecast.
• For the Japanese yen, read the USD/JPY forecast.
• For GBP/USD (cable), look into the British Pound forecast.
• For the Australian dollar (Aussie), check out the AUD to USD forecast
• For the kiwi, see the NZDUSD forecast.