USD/JPY was on a roll, finally taking out the 95 line and reaching levels last seen in August 2009. Will we see a continued march towards 100 or a period of consolidation now? Trade balance is the highlight of this week. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
Both houses of the Japanese parliament approved the appointment of Haruhiko Kuroda and two other BOJ members. They will start working this week, and there is speculation that they will make an emergency decision. Can they provide an extra boost for the yen?
Updates: Wednesday is a bank holiday in Japan, and there are no Japanese releases this week until late Wednesday (Thursday in Japan). USD/JPY has edged lower, as the pair was trading at 95.40. The Trade Deficit ballooned to 1.09 trillion yen from 0.68 trillion yen, which was higher than the estimate of 1.01 trillion yen. USD/JPY has moved lower, as the pair was trading at 95.14.
USD/JPY daily graph with support and resistance lines on it. Click to enlarge:
- Trade Balance: Wednesday, 23:50. Japan hasn’t seen a trade deficit surplus for around 2 years, since the catastrophic earthquake, tsunami and nuclear disaster. This is also contributing to a weaker yen. After reporting a deficit of 0.68 trillion yen last month, the deficit is expected to 1.01 trillion this time.
- All Industries Activity: Thursday, 4:30. This relatively late indicator has shown a strong rise of 1.8%. The figure is predicted to drop by 1.1% for the month of January.
*All times are GMT.
USD/JPY Technical Analysis
$/ ¥ began with the week with a new surge, reaching a peak of 96.71, a line that didn’t appear last week. A drop was followed by another surge, that reached a lower peak. Finally, the pair dropped towards 95 and closed at 95.27.
- 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.
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. The new 2013 peak of 96.71 is the next line..
95.88 now serves as a pivotal line within the new high range. The round number of 95 was breached, and now works as support.
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. The line is weaker now. 91.20, which capped the pair very temporarily on its way up in January 2013, is a support line and is now stronger.
The ultimate support line for now is 90 – a target marked by many analysts and a round number. This line remains close after the break. Just below, 89.67 capped the pair for several days in January 2013 and is now minor support.
Below, 89.10 was a peak in the summer of 2010, before the pair began descending and is now support. 88.40 is the peak of January 2013 and is a strong support line.
Another recent technical view: USD/JPY Hits New Long-Term High for Potential Uptrend Continuation – by James Chen
I remain bullish on USD/JPY
After the recent correction, the yen can continue declining. While the Fed is not expected to hint any tightening, thus weakening the greenback, the new BOJ governor could start his tenure with dramatic declarations, and push the pair higher, at least within the range.
Another technical analysis: USD/JPY Now Underway To 98.00 (Elliott Wave Analysis)
Further reading:
- 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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