USD/JPY posted losses last week, as the pair closed the week at 104.17. The upcoming week has just seven releases. Here is an outlook on the major market-movers and an updated technical analysis for USD/JPY.
US employment numbers started off the week strongly, as ADP Non-Farm Payrolls and Unemployment Claims looked sharp. However, Friday’s NFP of just 74 thousand was a two-year low, and the yen responded with gains.
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- Current Account: Monday, 23:50. Current Account is closely linked to currency demand, as a higher surplus indicates that foreigners are purchasing more yen to execute domestic transactions. Japan has posted two straight deficits, and a small deficit is expected for December, with an estimate of -0.02 trillion yen.
- Economy Watchers Sentiment: Tuesday, 5:00. This index surveys consumer confidence in the economy, with readings above the 50 level indicating optimism. The index climbed to 53.5 points in November, up from 51.8 points the month before. The upward trend is expected to continue, with the estimate standing at 54.2 points.
- M2 Money Stock: Tuesday, 23:50. This indicator looks at the money supply in circulation and in bank deposits. It is considered a minor event since much of the data was released in the Monetary Base event last week. The index has been increasing and rose to 4.3% in November. The upward trend is expected to continue in December, with the estimate standing at 4.5%.
- 30-year Bond Auction: Wednesday, 3:45. The average yield on 30-year bonds rose to 1.70% in November, up slightly from 1.62% a month earlier. No substantial changes are expected in the upcoming release.
- Preliminary Machine Tool Orders: Wednesday, 6:00. This manufacturing release continues to post impressive gains, with the previous release jumping by 15.4%. The markets will be looking for another strong gain for the December release.
- Core Machinery Orders: Wednesday, 23:50. This important manufacturing indicator should be treated as a market-mover. It tends to show strong movement, making accurate forecasts a tricky task. The indicator posted a modest gain of 0.6%, shy of the forecast of 0.9%. The markets are expecting an improvement in the December release, with an estimate of 1.2%.
- Tertiary Industry Activity: Wednesday, 23:50. Tertiary Industry Activity has struggled, posting four declines in the past five releases. The November release dropped 0.7%, well below the estimate of a 0.3% gain. However, the markets are expecting a strong turnaround, with an estimate of a 0.8% gain.
* All times are GMT.
USD/JPY Technical Analysis
We start with resistance at the round number of 110.00. This key level has remained intact since August 2008. This is followed by a resistance line at 109.18.
Next is 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.
106.66 has held firm since November 2008. This is followed by resistance at 105.70. This line held firm as the pair climbed higher late in the week before retracting.
We find the first support level for the pair at the round number of 104. This was a key line back in May 2008. This line was breached during the week but remains in place. It starts off the week as weak support for the pair.
102.50 continues to provide strong support. It marked the bottom of a dollar rally which started in early December, which has seen the yen climb above the 105 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. It is protecting the key level of 100.
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 dollar began a rally which saw it climb above the 105 line.
I am bullish on USD/JPY
The US has begun to taper QE, and with further moves expected early in 2014, the yen could remain under strong pressure. As well, the Bank of Japan has indicated it will continue its current aggressive monetary program, which could lead to further weakening of the Japanese currency. The yen crashed in 2013, losing about 17% of its value and enters 2014 vulnerable to further declines.
- 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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