Dollar/yen was pressured throughout most of the week, but it then made a big comeback. Is it ready to break the magical 100 line? Current Account and the G7 meetings are the highlights of this week. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
Kuroda set a timetable for the Japanese recovery: the summer of 2013. This overwhelmed financial markets, knocking down the yen , buoying stocks and driving government-bond yields to record lows. Nevertheless, bond yields started to move higher due to uncertainty about the BOJ’s debt purchases. Will Kuroda’s monetary policy produce prove effective in the coming months? In addition, the positive Non-Farm Payrolls report from the US also pushed the pair higher.
Updates: There are no Japanese releases until Thursday. USD/JPY is steady, as the pair was trading at 99.05. It’s been a very quiet week, with only on Japanese release so far. Leading Indicators came in at 97.6%, just shy of the estimate of 97.7%. Current Account, a key event, will be released later on Thursday. USD/JPY is steady, as the pair was trading at 98.83. Following the better than expected drop of US jobless claims, the pair began an upwards move and finally broke the 100 line. The next barrier is 101.44.
- Leading Indicators: Thursday 6:00. Japanese Leading Index improved reached a new five year high in February climbing to 97.6 from 95.0 in January. The reading was better than the 97.2 estimated. The leading index predicts economic performance 6 to 9 months into the future based on a number of economic indicators. Above 50 suggests improved economic activity. A further rise to 97.7 is forecasted.
- Current Account: Friday, 0:50. Japan’s current account balance remained unchanged in February at a seasonally adjusted 0.00T from 0.36T in the preceding month, while economists expected a 0.46T reading. A surplus of 0.48T is expected now.
- Economy Watchers Sentiment: Friday, 6:00. Japan’s service sector sentiment edged up to 57.3 in March, increasing for the fifth consecutive month. The weaker yen increased exports profits and higher share prices boosted domestic demand or cars and luxury goods. Another advance to 59.2 is forecasted.
- G7 Meetings: Fri-sat. The G7 meetings hosted by the Chancellor of the Exchequer George Osborne and the Governor of the Bank of England Sir Mervyn King, will meet in the UK and discuss the ongoing debt crisis in Europe and the challenges that face the global economy. The meetings are attended by finance ministers and central bankers from 7 industrialized nations.
*All times are GMT.
USD/JPY Technical Analysis
Dollar/¥ began the week under pressure and traded between the 97 and the 97.80 line (mentioned last week). It then made a sharp leap higher closing just one pip under 99.
- 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 and this is marked as the next target.
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 and was reached in April 2013. The pair stumbled below this line, which is getting weaker.
The round 97 line worked as important support in May 2013 and is now a key to the downside. The March 2013 peak of 96.71 is the next line, which now switches to support.
95.88 provided a temporary stop on the way up and was also the swing low on a fall during April. The round number of 95 is also watched by many and will remain critical support on a reversal.
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.
Another recent technical view: USD/JPY Rises to Approach Major 100.00 Resistance – by James Chen
I am bullish on USD/JPY
After a period of consolidation, the encouraging jobs report from the US sets the ground for fresh rises. The magical number of 100 could be broken in the third attempt. In addition, setting a timetable for the Japanese recovery and the green light from the G-20 certainly allows for more falls for the yen.
- 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