USD/JPY was so close to regaining the extra digit and breaking the 100 line, but eventually shied away and didn’t breach this magical line. Will it happen now or is this failure a bearish sign? Haruhiko Kuroda’s speeches are the major event this week. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
Last week, BOJ Governor Haruhiko Kuroda said the Bank of Japan has taken all necessary steps to meet its 2% inflation target in two years and that the bank will make sure the market will not be greatly affected by its unprecedented massive bond buying. Will Kuroda succeed in his mission? Time will tell. In the US, only jobless claims returned to normal levels, but other levels but the economy doesn’t look too good. A boost of strength for the yen could come from the US Treasury.
Updates: Speaking in Tokyo, BOJ Governor Kuroda said that the target of 2% inflation could be realized in under two years. Consumer Confidence was weak, coming in at 44.8 points. This fell short of the estimate of 46.7 points. The trade deficit dropped from 1.09 trillion yen to 0.92 trillion yen, matching the estimate. The G20 meets in Washington on Thursday and Friday. USD/JPY continues to move up, as the pair was trading at 98.01.
- Haruhiko Kuroda speaks: Mon 1:30, 7:15. BOE Governor Haruhiko Kuroda will make two speeches in Tokyo where he will elaborate on the recent monetary policy changes made by the BOJ. His wards can cause volatility in the market.
- Revised Industrial Production: Monday, 5:30. Japan’s industrial output advanced 0.3% in January, revised from 1.0%, suggesting production activity is rebounding moderately, in accordance with the pickup in the global economy. The capacity utilization index edged up 1.7% in January from a month earlier to 86.0. A decline of 0.1 is expected.
- Haruhiko Kuroda speaks: Monday, 7:15. BOE Governor Haruhiko Kuroda will speak in Tokyo at the 88th Convention of the Trust Companies Association of Japan. Japan’s central bank completely changed its tone on its last monetary policy meeting, surprising markets with a sizable stimulus package, as part of the new measures to spur growth and end years of falling prices. He may talk about the motives behind the BOC’s latest decision.
- Consumer Confidence: Wednesday, 6:00. Japanese consumer confidence improved in February reaching 44.3 from 43.3 in January, better than forecasts of a 43.0 reading. However the figure still indicates pessimism among consumers. A rise to 46.7 is forecasted this time.
- Trade Balance: Thursday, 0:50 Japan’s Adjusted Merchandise Trade Balance reached -1086.6 billion yen in February, compared with a previous reading of -740 billion yen, while analysts’ expectations were -1099.4 billion yen. With the new leadership, Japanese economy has better chances to end deflation and return to growth. An improvement to -920 billion is expected now.
- G20 Meetings: Thursday. April 18-19, G20 meetings attended by finance ministers and central bankers from 20 industrialized nations including the G7 nations will meet in Washington DC to discuss global financial issues and form global policies.
- All Industries Activity: Friday, 5:30. Japan’s All Industries Activity Index declined to a seasonally adjusted -1.4% in January, from 1.6% in the preceding month. Analysts expected Japan’s All Industries Activity Index to fall -1.1% last month. A smaller drop of 0.6% is forecasted.
- IMF Meetings: Fri-Sat. The IMP Spring meeting will include thousands of government officials, journalists, civil society organizations, and invited participants from the academia and private sectors. World Bank-IMF Development Committe and the IMF’s International Monetary and Financial Committee, will discuss progress on the work of the World Bank and the IMF.
*All times are GMT.
USD/JPY Technical Analysis
Dollar/¥ started the week by advancing towards the 100 level, and eventually traded in a range between this unreachable level and the 98.90 line (both mentioned last week). Towards the very end of the week, the pair dropped and lost this line, closing at 98.36.
- 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 didn’t manage to break this line yet.
The March 2013 peak of 96.71 is the next line, which now switches to support. 95.88 provided a temporary stop and now serves as minor support.
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: EUR/JPY Continues Recovery Targeting Higher Highs – by James Chen
I turn bearish on USD/JPY
While the general direction of the pair remains higher, the upcoming international meetings of the IMF and the G-20, alongside the report from the US Treasury all put pressure on the yen to strengthen after the recent big moves. So, the pair could make a correction this week, before advancing to the next levels.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast
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