Search ForexCrunch

After a week of advance, USD/JPY now faces higher and stronger resistance as we get to see what the BOJ thinks about the economy. Here’s an outlook for the Japanese events, and an updated technical analysis for USD/JPY.

The break above the strong line of 84.50 came early in the week, and the pair marked another tough line at 85.50. Will this be broken now? Let’s start.

USD/JPY  daily chart with support and resistance lines on it. Click to enlarge:

USD JPY Chart April 11-15

  1. Core Machinery Orders: Sunday, 23:50. A big jump in the volume of machine orders was reported for the month of January – 4.2%. A correction is expected this time, with a drop of 0.9%. Note that the data refers to February, still before the earthquake.
  2. Monetary Policy Meeting Minutes: Monday, 23:50. The recent meeting of the BOJ resulted in no new steps, after the meeting that came immediately after the quake. Yet the minutes might reveal what the different members think about the economy in post-quake Japan.
  3. Revised Industrial Production: Friday, 4:30. Japan’s industrial output grew quite slowly in February according to the first release. The rise of 0.4% will likely be confirmed now.

* All times are GMT.

USD/JPY Technical Analysis

Dollar/yen began the week with a struggle under the 84.50 line (discussed last week). After breaking higher, it didn’t fall below, but couldn’t breach 85.50. All in all the pair made gains.

Looking up, we have a new resistance line at 85.50. This proved to be a very tough line in the past week, with the pair eventually making a big fall off this line.

Above, 85.93, which was the peak after the yen intervention in September, is the next, close, line of resistance.  Further, there’s a bigger gap until the next line –  87  isn’t only a round number – it was also support back in July 2010.

Higher above, 88.12, which capped the pair back in August and previously worked as support is the next stronghold.  It’s followed by 89.10, which worked in both directions before July 2010. The last line for now is the round number of 90.

Looking down, 84.50 now switches its role to support. It wasn’t really tested after being broken. It’s followed by 84, which is only minor support now.

Moving lower, we find 83.40, which returns to its role as support, a role it had a few months ago, and served as strong resistance just before the tragedy.  Next, minor support is found at 82.87, the area where the BOJ intervened in September. It recently served as resistance.

Below, the 81.80 – 82 region is a very strong area of support. It worked as a distinctive line in both directions in recent months.

Even lower, 80.90, which had a role as a pivotal  line is  now only minor support. It’s followed by the  November’s lows of 80.40, which also worked two weeks ago.  The previous historic low of 79.75 which was reached in 1995 and briefly worked as resistance before the big intervention, provides further support.

I remain bullish on USD/JPY.

Even in a week where the US dollar was slashed, it managed to gain against the yen. The improvement in the US, together with the weak Japanese economy, all point to further gains. Note that the yen crosses continue to rally.

Further reading: