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For a second straight week, USD/JPY  was almost unchanged, as the pair closed at 109.70.  However, the pair did show strong movement in both directions. This week has 9 events. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

The US dollar received a boost from an excellent Nonfarm Payrolls late in the week. In Japan, it was a mixed week, as Retail Sales jumped while Preliminary Industrial Production  declined. The  PMI-like Tankan indices were also mixed.

[do action=”autoupdate” tag=”USDJPYUpdate”/]

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

USDJPY Forecast Oct6-10

  1. BoJ Monetary Policy Statement: Tuesday, Tentative. The week starts off with a BoJ policy statement, a key event  which can have a significant effect on the direction of USD/JPY. Any hint of additional stimulus from the BoJ could push the yen lower. A press conference will follow the release of the statement.
  2. Leading Indicators: Tuesday, 5:00. This indicator has been alternating between gains and declines in recent readings. In July, the indicator posted a small gain of 0.2%, well off the estimate of 1.2%. The estimate remains unchanged at 1.2% for the upcoming release.
  3. Current Account: Tuesday, 23:50. Retail Sales is one of the most important economic indicators and should be treated by traders as a market-mover. The indicator bounced back last month with a gain of 0.5%. This easily beat the estimate of -0.1%. Little change is expected in the August release, with an estimate of 0.4%.
  4. BoJ Monthly Report: Wednesday, 5:00. This minor event provides an analysis of current and future economic conditions. It is unlikely to have much effect on the yen’s movement.  
  5. Core Machinery Orders: Wednesday, 23:50.  Core  Machinery  Orders, an important manufacturing indicator,  fell to 3.5% last month,  compare to 8.8% a month earlier. The markets are  braced for  the weaker readings to continue, with an estimate of a 1.1% gain.  
  6. Preliminary Machine Tool Orders: Thursday, 6:00. The indicator slipped to 35.6%, compared to 37.7% a month earlier. As am minor event, it is unlikely to affect the pair’s movement.
  7. BOJ Monetary Policy Meeting Minutes: Thursday, 23:50.  The markets will get a look at the minutes of the BoJ policy meeting which took place earlier in the week. Any unexpected details in the minutes, such as dissension amongst BoJ policymakers, could affect the yen.
  8. Tertiary Industry Activity: Thursday, 23:50. This is the third manufacturing release of the week. The indicator posted a flat reading of 0.0% last week, short of the estimate of 0.3%. The forecast for the upcoming release stands at 0.2%.
  9. Consumer Confidence: Friday, 5:00. Consumer Confidence has been steady in the past several releases. The indicator came in at 41.2 points, shy of the estimate of 42.3 points. The estimate for the upcoming release stands at 42.2 points.

* All times are GMT

USD/JPY Technical Analysis

Dollar/yen started the week at 109.40 and  climbed to a high  of 110.09. The pair then reversed directions, dropping to a low of 108.01, breaking below  support at 108.58 (discussed  last week).  USD/JPY  posted  sharp gains on Friday, closing  at 109.70.

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

Technical lines from top to bottom:

We start with resistance at 114.65, which  has  remained  intact  since December 2007.

112.48 marked the start of a yen rally in January 2008, which saw USD/JPY drop below the 100 level.

110.68 represented a high point of a strong dollar rally in August 2008,  which started around the key 100 level.

108.58 was breached during the week but recovered. It continues in a support role.

106.88 is next. This line switched to a support role earlier in September.

105.44 had held firm since December.

104.92 capped the pair around the turn of the year.

104.25 was an important resistance line back in August. It is the final support level for now.

 

I am  bullish  on  USD/JPY

In the US,  a deepening recovery in the US  bodes well for the greenback, which could retake the 110  level early in the week.  The Japanese economy lags well behind that of the US, and further stimulus from the BOJ will only weigh on the shaky yen.

 

In our latest podcast, we  discuss the big events for October:

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