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USD/JPY  had its best week since May, as the pair  jumped over 200 points. USD/JPY closed at 121.45. This week’s  key event is the BOJ Monetary Policy Statement.  Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

USD/JPY posted strong gains late in the week, following positive US housing and job numbers. Unemployment Claims and  Existing Home Sales  both beat their estimates. There were no Japanese key events last week, but continuing speculation that the BOJ will introduce further easing measures is weighing on the yen.

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

USD_JPY_Forecast.Oct26-30

  1. SPPI: Monday, 23:50. This indicator measures inflation in the manufacturing sector. The index edged up to 0.7% in August, better than the forecast of 0.5%. The estimate for the September report stands at 0.6%.
  2. Retail Sales: Tuesday, 23:50. Retail Sales is the primary gauge of consumer spending, and an unexpected reading can have a sharp impact on the movement of USD/JPY. The indicator softened to 0.8% in August, compared to 1.6% a month earlier. This was short of the forecast of 1.2%. The downward trend is expected to continue, with the estimate for September standing at 0.5%.
  3. Preliminary Industrial Production: Wednesday, 23:50. This manufacturing indicator has been struggling, posting three declines in the past four months. The August drop of 0.5% caught the markets by surprise, as the estimate stood at 1.1%. The markets are braced for another decline in September, with a forecast of -0.5%.
  4. Household Spending: Thursday, 23:30. Household Spending is an important indicator of consumer spending, a key driver of economic growth. The indicator bounced back in August, with an excellent gain of 2.9%, crushing the estimate of 0.4%. The estimate for the indicator stands at 1.2%.
  5. Tokyo Core CPI: Thursday, 23:30. Analysts pay close attention to this index, which is the most important Japanese inflation indicator. The index has posted three consecutive declines, and the September forecast stands at -0.2%, identical to the reading in August.
  6. BOJ Monetary Policy Statement: Friday, Tentative. The Bank of Japan is under strong pressure to increase monetary easing, with the economy limping along and anemic inflation levels. Any further easing measures could push the yen downwards.
  7. Housing Starts: Friday, 5:00. Housing Starts provides a snapshot of the level of activity in the housing sector. In August, the indicator jumped 8.8%, beating the forecast of 7.8%. A softer reading is expected in September, with an estimate of 6.5%.
  8. BOJ Outlook Report: Friday, 6:00. The markets will be following the BOJ’s view of economic conditions and inflations. This report is issued twice a year, and should be treated as a market-mover.

* All times are GMT

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

USD/JPY Technical Analysis

USD/JPY  opened the week at 119.30 and touched a low of 119.13.  It was all uphill  for the pair, which hit a high of 121.48, putting strong pressure on resistance at 121.50  (discussed last week). USD/JPY closed the week at 121.45.

Technical lines from top to bottom:

With the pair posting sharp gains last week, we start at higher levels:

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

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 the next line of support.

116.90 supported dollar/yen early in the year.

I am  bullish  on USD/JPY

The Fed may not make any moves until 2016, but monetary divergence continues 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. All eyes will be on the BOJ’s meeting early in the week, and any new stimulus measures would likely send the yen sharply lower.

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Further reading: