Dollar/yen initially had a positive start to the week as tensions around North Korea eased and the greenback attempted to make a comeback. However, the terror attack in Barcelona, as well as the Trump troubles, triggered a risk-off sentiment that helped the yen.
USD/JPY fundamental movers
Mixed signals from the US
The most important data point coming out of the US, retail sales, beat expectations. That was much needed for the US dollar. However, the Fed’s meeting minutes seemed to show hesitation.
With a fading out of tensions with North Korea, the yen lost support. Nothing has materially changed around the rogue nation, but the focus of the US President has moved elsewhere. Yet Trump’s failure to fully denounce the terror in Charlottesville triggered the disbanding of two economic councils and rumours that Gary Cohn would quit. This hurt the dollar.
And while the tensions around North Korea faded, the horrific terror attack in Barcelona dampened the mood. And a damper mood helps the safe-haven yen.
In Japan, we learned that the economy grew at a whopping rate of 1% q/q. However, it was not enough for the yen. Once again, we have seen how the yen ignores the data and moves by the ebb and flow of risk.
Jackson Hole and a few other events
The big event of the week happens on Friday and Saturday, with the Jackson Hole Symposium. Central bankers descend on the resort in Wyoming and the speech by Janet Yellen is closely watched. Will she provide further hints about rate hikes? Also, watch out for housing data and durables goods orders.
See all the main events in the Forex Weekly Outlook
Japan will release inflation data on Friday, with core CPI expected to remain subdued. The BOJ’s own core CPI number, published at 5:00, is of higher importance. Any rise from the 0.3% level seen in July will be blessed, but chances are slim to see a significant impact on markets.
Key news updates for USD/JPYUpdates:
- Aug 25, 16:08: Yellen sends the dollar tumbling down at Jackson Hole: What had markets expected from the Jackson Hole Symposium? In any case, Yellen did not provide any surprises. And this...
- Aug 25, 8:26: GBP/JPY: Targeting 38.2% Fibo En-route To 50% Fibo: Levels: Pound/yen continues producing lots of pips for traders. What’s next for the “dragon”? Here is the technical view from Credit...
- Aug 24, 16:00: US existing home sales miss with 5.44 million – USD: A small miss: 5.44 million against 5.57, a drop of 1.3% instead of an expected rise. The data is not...
- Aug 23, 16:00: US new home sales miss with 571K – USD slips: US new home sales fell short of expectations falling by 9.4% to 571K. However, the fall is from 630K in...
- Aug 23, 8:55: USD/JPY rejected at resistance on Trump being Trump: Calm summer markets and a “presidential” statement from Trump on Afghanistan allowed USD/JPY to rise. Without any issues, there is...
- Aug 21, 19:09: Buy USD/JPY targeting 111.50 – Citi trade of the week: USD/JPY started off the week with ith a drop under 109, but the team at Citi has other plans for...
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.
USD/JPY Daily Chart
I remain bearish on USD/JPY
While the Japanese yen lost some of its safe-haven appeals, the dollar remains weaker. The Fed is in no hurry to raise interest rates.