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USD/JPY made another failed attempt to break the 100 line, and eventually fell down. Household Spending, Retail Sales, and Prelim Industrial Production   are the major events this week. Here’s an  outlook  for the Japanese events and an updated technical analysis for  USD/JPY.

Last week the Bank of Japan refrained from further policy initiatives following the April 4 policy meeting and was divided over whether the central bank can meet its inflation target in two years. Economists believe it would be difficult to achieve the 2.0% target rate with monetary easing alone. In the US, GDP disappointed and this sent USD/JPY tumbling down. Where will the pair go now?

Updates: Manufacturing PMI came in at 51.1 points. Household Spending jumped to 5.2%, blowing past the estimate of 1.8%. The Unemployment Rate fell to 4.1%, its lowest level in 2013. Preliminary Industrial Production came in at 0.2, below the forecast of 0.4%. Retail Sales looked weak, declining by 0.3%. The estimate stood at 0.5%. Housing Starts were very sharp, jumping 7.3%. This was well above the estimate of 5.7%. USD/JPY is steady, as the pair was trading at 97.50. Average Cash Earnings dropped 0.6%, beating the estimate of -1.0%. The BOJ released the minutes of its most recent policy meeting.  The minutes pointed to concern by some policy board members that  the increase  in QE  could actually  hurt  financial markets and discourage bank lending.     Monetary Base rose 23.1%, up from 19.8% in the previous release. USD/JPY is steady, and was trading at 97.25.

USD/JPY  daily chart with support and resistance lines on it. Click to enlarge:USDJPY Technical Analysis forex trading fundamental outlook and sentiment week of April 29 May 3 2013

  1. Household Spending: Tuesday, 0:30. Japan Overall Household Spending increased by to 0.8% in February, following a 2.4% rise in January. The increase was above the 0.4% rise predicted. This was the second consecutive monthly rise, indicating a positive trend in Japan’s economic activity. Another increase of 1.7% is expected now.
  2. Prelim Industrial Production: Tuesday, 0:50. Japan’s industrial production declined 0.1% in February from the previous month, marking the first drop in three months, despite this decline; analysts believe Japan’s industrial production is picking up. An increase of 0.4% is expected.
  3. Retail Sales: Tuesday, 0:50. Japanese retail sales contracted 2.3% in February from a year earlier, missing predictions of a 0.9% rise. This weak reading followed a 1.1% drop in the previous month, indicating Japan’s economy is still sluggish. A rise of 0.5% is forecasted.
  4. Housing Starts: Tuesday, 6:00. Housing starts in Japan gained 3.0% in February from a year earlier, rising for the sixth straight month. Attractive housing loans and rising demand before April’s planned sales tax hike, boosted sales. The reading was much better than the 1.0 contraction forecasted by analysts. A bigger gain of 6.3% is predicted now.
  5. Average Cash Earnings: Wednesday, 2:30. Japan’s average cash earnings edged down more-than-expected in the last quarter, down to a seasonally adjusted -0.7%, from 0.1% in the preceding quarter. Economists expected a smaller decline of 0.1%. A further decline of 1.0% is forecasted.
  6. Monetary Base: Thursday, 0:50. Circulating currency in Japan surged 19.8% on year in March, reaching 134.741 trillion yen, following a 15.0% annual increase in February. The rise was higher than the 16.3% increase anticipated. For the first quarter of 2013, the monetary base climbed 15.2% on year an increase of 9.2% in the previous three months.
  7. Monetary Policy Meeting Minutes: Thursday, 0:50. The last meeting minutes held in March, chaired by the  previous  governor, Masaaki Shirakawa reveal that many of the members were satisfied with the moderate monetary easing enacted by the BOC prior to recent change of roles in the BOC and the Government. At the March meeting, the BOJ board voted unanimously to leave the scale of its financial asset-buying fund at Y101 trillion after raising it from Y91 trillion last December.

*All times are GMT.

USD/JPY  Technical Analysis

Dollar/ ¥ started the week with another move towards the 100 line (mentioned last week) before falling and trading at a lower range. The double damage on Friday sent it below 98.90, and also temporarily under 97.80, before it recovered.

[do action=”tradingviews” pair=”USDJPY” interval=”60″/]
Technical lines from top to bottom

Looking above 100, we find the 101.44 line, which was the post crisis high seen in April 2009. The obvious number below is the very round number of 100 and this is marked as the next target.

98.90 capped the pair in June 2009 and serves as minor resistance. A stronger line is the  97.80 line, which was a peak back in 2009 and was reached in April 2013. The pair stumbled below this line, which is getting weaker.

The March 2013 peak of 96.71 is the next line, which now switches to support.  95.88 provided a temporary stop on the way up and was also the swing low on a fall during April.

The round number of  95  is also watched by many and will remain critical support on a reversal.  The previous February 2013 peak of 94.40 should be noted.

A second move towards that line in February fell short, but the pair made it in March.  93.84  was an initial peak for the pair as it climbed higher and has served as a cap afterwards.

92.95 was an earlier resistance line, and later served as support.  92.12 was a peak in the past, and provides some support, as seen in February 2013.

Another recent technical view:  USD/JPY Rises to Approach Major 100.00 Resistance  –  by James Chen

I am neutralon USD/JPY

The long term direction of USD/JPY is up, but with the US expected to continue the QE program and fresh worries from Europe, the pair could take a longer pause for now, at least until the next BOJ meeting. The last one, which was held only weeks after the big delivery of QE, disappointed the yen bears and left them hungry.

Further reading: