USD/JPY is looking for a bottom – Forecast August 7-11

The dollar’s demise was exacerbated by the White House chaos, and the pair reflected this quite well.The weakness comes despite OK data from the world’s largest economy. However, the upbeat jobs report allowed for a more significant bounce, keeping the pair within a safer distance from 110.

Will the pair continue towards the bottom of the wide range or has it fallen enough?

USD/JPY  fundamental  movers

White house chaos

Anthony Scaramucci was the latest White House staffer to lose his job, extending a long list ex-Trump administration officials. The mess joined yet another failure of the health care bill and doubts about changes that markets really want: tax reform and infrastructure spending.

US data was not that bad, with healthy numbers from consumer confidence, ISM PMIs, ADP, and also consumer confidence.

In Japan, the core CPI as measured by the BOJ beat expectations but remains very low at 0.3% y/y.

JOLTs, inflation figures and perhaps new political developments

After the NFP storm, we get a more subdued week: the JOLTs report completes the picture regarding the job market. Things get more interesting later in the week with the PPI and CPI reports. Inflation is clearly missing, despite a growing jobs market.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

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USD/JPY Technical Analysis

115.35 is the next line of resistance in case the pair break the cycle high of 114.30 which remains critical resistance after capping the pair back in May. The break to 114.50 did not go very far.

113.50 was a temporary line of resistance on the way up in July. 113.70 was a separator of ranges in June.

112.20 used to be important in the past. It is closely followed by 111.80, which capped the pair in May.

Looking down, 110.70 was a separator of ranges in June and remains important.  109.60 was a gap  line in late April, a gap that was never closed.

In June, the pair found support several times at 109.10 and this also works as support.  Further below, the cycle low of 108.10 is of high importance. Looking lower, we are back to levels seen in November, but the door is basically open to 105.

Steep uptrend support clearly broken

After slipping off the steep line of uptrend support, the pair not only went further away from the uptrend but continue lower. The break is more than confirmed.

USD/JPY  Daily Chart

USD/JPY Sentiment

I remain bearish on USD/JPY

The US dollar remains under pressure amid political mess that refuses to die and doubts about the next moves by the FED. It seems there is nothing the BOJ can do to stop the strengthening of the yen, not now.