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The rate decision is the highlight of a very busy week in Japan. Here’s an  outlook  for the Japanese events and an updated technical analysis for  USD/JPY.

Last week USD/JPY came below the critical 80 level strengthening the yen against the dollar due to a disappointing slowdown in the US market with worse than predicted Final GDP figures raising concern over the pace of recovery for the Japanese market. Will this trend continue? Let’s Start:

USD/JPY  daily chart with support and resistance lines on it. Click to enlarge:USD JPY Chart June 13 17 2011

  1. Core Machinery Orders: Monday, 0:50. Japan’s core machinery orders increased by 2.9% in March, this unexpected rise contrasted the pessimistic forecast of a 9.7% plunge.  The previous reading showed 1.9% decline. This encouraging figure anticipates a rise in spending by companies. A further increase of 1.8% is expected.
  2. BSI Manufacturing Index: Tuesday, 0:50. Big Japanese manufacturers were more optimistic regarding business conditions in the first quarter reaching -3.2 from -8.0 in the previous quarter. However the survey was done before the earthquake, tsunami and nuclear crisis hit Japan in March 2011. A plunge to 2.1 is predicted now.
  3. The Japanese Rate decision: Tuesday. The Bank of Japan kept monetary policy unchanged in May with hopes of recovery by autumn thus offering no further monetary easing. The optimistic outlook was led by mended supply chains and power supply giving a boost to production and speeding the recovery process. The BOJ kept rates unchanged at a range of zero to 0.1. No changes are likely to occur.
  4. Revised Industrial Production: Tuesday, 5:30. Japan’s industrial production plunged a record 15.5% in March after a 15.3% drop in March following the March 11 disasters with updated reports from companies. However current figures are more optimistic leading the way for a modest recovery.
  5. BOJ Monthly Report: Wednesday, 6:00. The BoJ released its monthly report outlining the information led to making the latest interest rate decision. The next monthly report is expected to be more optimistic.
  6. Monetary Policy Meeting Minutes: Friday, 0:50. Japan’s economy will shrink 0.9% this year due to the major loss in production following the March 11 disaster. Japan is expected to recover from the second half of 2011 to 2012. This and more is likely to appear in the current Monetary Policy Meeting Minutes.

*All times are GMT

USD/JPY  Technical Analysis

Technical levels from top to bottom:

84 was a low peak before the March 11 catastrophe and minor resistance now.  83.30 is another weak line after capping the pair just before the disaster at the beginning of March and also working as support a few months earlier.

82.87 was the trough before the BOJ intervention in September 2010 and also played an important role in recent weeks as the peak of a recovery attempt.  82.20 capped the pair in a very stubborn way a few weeks ago and remains a strong line now.  81,33 proved to be a distinctive line separating ranges – it was a double top about a month ago and now works as resistance, though weaker than earlier.

80.40 had an important role just now in capping the pair, and also at the end of 2010 as a support line. It is now tough resistance.  79.75 is the historic low of 1995 and played a critical role when the pair collapsed in March. It worked nicely now as well.

It’s followed by 79.16 which is minor resistance as well. The last line is 78.27 – both were significant before the big intervention.

I am bullish on USD/JPY.

At the current levels, the safe haven status of the yen is very unsafe for its economy, and an intervention can happen. In the ugly contest between both countries, Japan is still weaker.

Further reading:

 

 

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