The strength of the yen seems is followed by closely by policymakers in Tokyo. Will we see an intervention soon? Japan‘s rate decision and BOJ press conference are the major events this week. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
Last week, Japan’s retail sales gained an unexpected 1.1% contrary to 0.6% drop predicted by analysts following 1.3% decrease in the previous month. Tokyo Core CPI also increased by 0.4% more than 0.2% gain expected while Household Spending plunged 4.2% and Prelim Industrial Production gained less than expected increasing by 3.9% following 6.2% climb in the previous month. Nevertheless the coverall picture is optimistic indicating a continuation of recovery for the Japanese market will the pace of recovery pick up further in the next weeks?
- Monetary Base: Monday, 23:50. Total currency circulating in Japan grew in June by 17.0% from a tear earlier better than the 16.4% rise expected and higher than the prior reading of 16.2% gain. Markets were showered with cash to try and calm the market following the great disaster on March 11. An increase of 18.1% is expected. A rise of 0.4% is forecasted.
- Average Cash Earnings: Tuesday, 1:30. Japanese workers increased their income in May from a year earlier gaining 1.1%, following 1.4% drop in the previous month.
- Rate decision: Friday. The Bank of Japan held its overnight call rate unchanged at 0.1% by a unanimous vote making no alterations in its other monetary policy decisions and announcing a pick up in the Japanese economic activity. No change is foreseen.
- Leading Indicators: Friday, 5:00. May’s business conditions indicators point on improvement in Japan’s market activity although the leading indicators rising to 99.8 are still below the pre-earthquake level. The economy is recovering in a rapid pace following the on 11 March much better than initially predicted. An increase to 103.6 is expected now.
*All times are GMT
USD/JPY Technical Analysis
Dollar/yen started off the week with a failed attempt to break above 78.20 (mentioned last week). From there on, the pair traded between 77.50 and 78.20, before making a final leg downwards and closing the week at 76.78, very close to the historic lows seen after the March 11 catastrophe.
Technical lines, from top to bottom:
82.87 was the trough before the BOJ intervention in September 2010 and also played an important role in recent weeks as the peak of a recovery attempt. 82.20 capped the pair in a very stubborn way many weeks ago and remains a strong line now.
81,50 was a peak before the recent fall and is a new line in the graph. 81.06 was a weak line of support in May and slowed down a second move upwards.
80.50 held the pair several times in recent weeks and remains a strong and immediate line of resistance. The round number of 80 is only a minor line now.
79.75 is the historic low of 1995 and played a critical role when the pair collapsed in March. After the pair fell below this line, it quickly switched to strong resistance. Below, 79.30 proved to be a persistent cap for dollar/yen, holding down recovery attempts. also just now. An attempt to break higher resulted in a drop lower.
78.50 provided some support before the next leg down, and is now resistance. Further down, 78.20 worked as temporary resistance, and is quite weak now.
77.50 was the bottom border of the range, and now also switched positions. It is followed by 76.70, which was the bottom just now.
Further below we have the swing record low of 76.25, which was seen on the huge collapse in March.
In uncharted territory, the round number of 75 draws attention.
I am bullish on USD/JPY.
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