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USD/JPY  gained close to one cent, following the Federal Reserve announcement.   The pair closed just above the 104 line. This week is fairly busy, with 11 releases. Here is an outlook on the major market-movers and an updated technical analysis for USD/JPY.

The US dollar continues to gain ground against the sagging yen. The dollar was buoyed by the Federal Reserve announcement that it would commence a $10 billion taper of QE in January. The yen was unable to make up ground despite some dismal US data late in the week, highlighted by another weak Unemployment Claims.

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USD/JPY daily chart with support and resistance lines on it. Click to enlarge:     USD JPY Forecast Dec. 23-27

 

  1. BOJ Monthly Report: Tuesday, 5:00.  This report provides an analysis of current and future economic trends as well statistical data  used by policymakers in  making  monetary decisions. It is a minor release and usually does not have a major  impact on the movement of  USD/JPY.
  2. Corporate Services Price Index: Tuesday, 23:50. This index is an important inflation indicator. The index has been rising as we continue to see stronger inflation in the Japanese economy. The index rose to 0.8% in October, and an identical reading is expected in the upcoming release.
  3. BOJ Governor Haruhiko Kuroda Speaks: Wednesday, 4:00. Kuroda will address the Japan Business Federation in Tokyo. Analysts will be looking for any hints regarding future monetary policy and a speech that is more hawkish than expected is bullish for the yen.
  4. Manufacturing PMI: Wednesday, 23:15. This indicator is based on a survey of purchasing managers who work in the manufacturing sector. The index has been steadily rising and climbed to 55.1 points in October, reflecting optimism about the manufacturing industry.
  5. Monetary Policy Meeting Minutes: Wednesday, 23:50. This important indicator provides details of the BOJ’s most recent policy meeting. Recent meetings have  indicated some dissenting opinions  from policymakers regarding the BOJ’s monetary decisions, and analysts will be interested in seeing if this was the case in the most recent meeting.
  6. Housing Starts: Thursday, 5:00. Housing Starts tends to show strong fluctuations, making accurate forecasts a tricky task. The indicator rose 7.1%, well above the estimate of 5.5%. However, this was the indicator’s lowest reading since April. The markets are expecting a improvement for November, with a forecast of 9.5%.
  7. Household Spending: Thursday, 23:30. This indicator is an important gauge of consumer spending. The indicator weakened in October, posting a gain of just 0.9%, short of the estimate of 1.2%. The November estimate stands at 1.9%.
  8. Tokyo Core CPI: Thursday, 23:30. Tokyo Core CPI is the most important consumer inflation indicator, and an unexpected reading can affect the direction of USD/JPY. The index has been rising in recent releases and came in at 0.6% last month, surpassing the estimate of 0.4%. The upward trend is  expected to continue, with an estimate of 0.7%.
  9. Preliminary Industrial Production: Thursday, 23:50. This manufacturing indicator has not been consistent and posted a weak gain of 0.5% last month. This was well below the estimate of 2.1%. Little  change is expected in the upcoming release, with an estimate of 0.6%.
  10. Retail Sales: Thursday, 23:50. Retail Sales is the one of the most important gauges of consumer spending and can have a major impact on USD/JPY. The indicator posted a respectable gain of 2.3% in the previous release, edging above the estimate of 2.2%. The forecast for November stands at 2.9%. Will the estimate match or beat this rosy prediction?
  11. Average Cash Earnings: Friday, 1:30. This indicator is another gauge of consumer spending. The indicator has not impressed, posting two consecutive gains of just 0.1%. The markets are expecting an improvement for November, with an estimate of 0.4%.

*All times are GMT.

USD/JPY Technical Analysis

USD/JPY started the week at 103.26. The pair  dropped to a low of  102.57, as support at  102.50 (discussed last week) held firm. USD/JPY  then reversed directions and punched past the 104 line, touching a high of 104.63.  USD/JPY closed the week at 104.04.
Live chart of USD/JPY: [do action=”tradingviews” pair=”USDJPY” interval=”60″/]
Technical lines from top to bottom

We  begin with resistance at 108.38. This line has remained intact since September 2008. At that time, USD/JPY was in a downward spiral which saw it drop below the 0.90 line.

Next is resistance at 106.66, which has held firm since November 2008.   This is followed by resistance at 105.70.

This is followed by resistance at the round number of 104. This was a key line back in May 2008. The soaring dollar broke through this line, and USD/JPY starts the week just above it a 104.04.

102.50  continues to provide support and held firm early in the week as the pair dropped. It has some breathing room as the pair trades above the 104 line.

101.44 was the post-crisis high seen in April 2009, and continues to provide strong support.

100.85 saw activity in July as the dollar showed strength against the yen.

The round number of 100 is  a key psychological level. It is providing USD/JPY with steady support.

The final support level for now is at 98.80. It has remained firm since early November, when the pair began the present rally which has seen the yen tumble to five-year lows.

 

I am bullish on USD/JPY

The dollar continues to push hard on the retreating yen, which has slumped to its lowest level in five years. With the BOJ continuing its aggressive monetary stance, the yen could lose more ground. As well, the Federal Reserve finally pushed the taper trigger, and this could give the dollar a strong boost, making life more miserable for the struggling yen.