USD/JPY Outlook Nov. 11-15

The Japanese yen showed some strength  last week but ended the week almost unchanged, as USD/JPY closed the week just above the 99 line. There are nine events in the upcoming week. Here is an outlook on the major market-movers and an updated technical analysis for USD/JPY.

 Japanese releases were uneventful last week. NFPs soared on Friday, helping the US dollar push higher and close above the 99 line.

USD/JPY daily chart with support and resistance lines on it. Click to enlarge:  

1. Current Account: Monday, 23:50. Current  Account has looked steady, with the past two readings around 0.35 trillion yen. The markets are anticipating a weak release in October, with an estimate of -0.10 trillion. If the indicator does fall below the zero level, it would mark the first decline since October 2012.
2. Economy Watchers Sentiment: Monday, 5:00. This indicator continues to post readings above the 50-point level, indicating optimism about the economy. The previous release came in at 52.8 points and the estimate for October stands at 54.2 points.
3. Tertiary Industry Activity: Monday, 23:50. This important manufacturing indicator posted a gain of 0.7% last month, ending a slide of two straight declines. The markets are expecting a weak gain of 0.2% for the upcoming release.
4. 30-year Bond Auction: Tuesday, 3:45. The yield at the October auction was somewhat lower than previous releases coming in at  1.63%, compared to 1.80% in September. Will the yield bounce back up this month?
5. Consumer Confidence: Tuesday, 5:00. Consumer Confidence is an important indicator, as improved consumer confidence usually translates into increased consumer spending. The indicator improved to 45.4 points in September, a four-month high.
6. Preliminary Machine Tool Orders: Tuesday, 6:00. This manufacturing indicator continues to post declines, pointing to trouble in the manufacturing sector. The indicator posted a decline of 6.3% in September.
7. Core Machinery Orders: Tuesday, 23:50. Core Machinery Orders tends to show a lot of fluctuation, leading to estimates that are often off the mark. The previous release posted an excellent gain of 5.4%, well above the estimate of 2.9%. The markets are  bracing for a downward turn in October, with an estimate of -1.8%.
8. Preliminary GDP: Wednesday, 23:50. GDP, released on a quarterly basis,  provides a gauge of the health and direction of the Japanese economy and should be treated as a market-mover. The indicator psoted a gain of 0.6% in Q2, falling short of the estimate of 0.9%. The markets are expecting a weaker reading in Q3, with a forecast of 0.4%.
9. Revised Industrial Production: Thursday, 4:30. This manufacturing indicator tends to fluctuate, but market estimates have been quite accurate. The September reading came in at -0.9%, but the markets are expecting a sharp improvement in October, with an estimate of a 1.5% gain.

*All times are GMT.

USD/JPY Technical Analysis

We  begin with resistance at the round number of 104. This was a key line back in May 2008. At that time, USD/JPY was in the midst of a rally which saw the pair climb as high as 110.

102.50 was an important resistance line in late May but has not been tested since that time.

101.44 was the post-crisis high seen in April 2009, and has not been tested since mid-July. 100.85 saw activity in July as the dollar showed strength against the yen.

100, a key level, saw some activity in September and continues to provide resistance.

98.90  was breached as  USD/JPY posted strong gains. It begins the week as a weak  support line and could see action early in the week.

97.80  continues  to provide support.  It was briefly breached as the yen showed some strength before retracting.  This line  has some breathing room  as the pair trades around the 99 line.

96.59 has held firm since the first week in October. It marks the low point of a downward trend by the pair which started in late September.

The round number of 95 is a psychologically significant line. It has held firm since mid-June.

93.79 is our final support line. It marked the low point of a rally by USD/JPY which started in mid-June and saw the pair climb to the mid-101 range in July.

I am bullish on USD/JPY

The dollar got a shot in the arm following a sizzling NFP and finds itself above the 99 line for the first time since late September. We could see the momentum continue into next week, as speculation grows about a possible December taper.