Search ForexCrunch

The yen enjoyed its safe haven status to gain against the greenback as the US economy has shown signs of weakness. Trade balance in the highlight event this week. Here’s an  outlook  for the Japanese trading events and an updated technical analysis for  USD/JPY.

The U.S. dollar climbed further against the yen following a positive bulk of US figures including improvement in the US job market, better housing data and narrowing of the US Current Account deficit. Will this trend continue?

USD/JPY  daily chart with support and resistance lines on it. Click to enlarge:USD/JPY Chart  June 20 24 2011

Let’s Start:

  1. Trade Balance: Sunday, 23:50. Trade balance dropped less-than-expected in April to a seasonally adjusted -0.50T, from 0.10T in the prior month. Economists had predicted the trade balance deficit to reach 0.59T. A further increase in deficit to -0.54T is expected now.
  2. All Industries Activity: Tuesday, 4:30. Japan’s all industry activity index decreased more-than-expected by 6.3% to 90.7 in March after a 0.7% gain to 96.8 in February indicating a drop in production following the March 11 earthquake and tsunami. An increase of 1.9% is predicted.
  3. CSPI  : Thursday, 23:50. Japan’s corporate services price index (CSPI) decreased by 0.8% in April from a year earlier while services declined by 0.0% from the previous month. A smaller drop of 0.7% is forecasted.

*All times are GMT

USD/JPY  Technical Analysis

Dollar/yen managed to rise at the beginning and the middle of the week, gaining ground but falling short of the 81.33 line (mentioned last week). The finish of the week was totally different, with a drop that ended at the round number of 80.

Technical lines, from top to bottom:

83.30 is a weak line that capped 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.

80.70 capped the pair several times in recent weeks and remains a strong and immediate line of resistance.  79.75 is the historic low of 1995 and played a critical role when the pair collapsed in March. It worked nicely recently and will be critical for the pair now.

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.

The strength of the yen might trigger an  intervention.  While the recent economic indicators from the US were quite terrible, Japan isn’t doing much better.

The popular cross: FX Tech Strategy sees GBP/JPY maintaining a recovery tone.

Further reading: