Dollar/yen remains very stable. Too stable. Core Machinery Orders, Tertiary Industry Activity and BOJ Monthly Report are the major events this week.Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
Last week, the Tankan Manufacturing Index gained 2 points as predicted while the non- manufacturing index climbed by a mere 1 point unlike the 3 points predicted and Overnight Call Rate remained the lowest as expected. Nevertheless a positive growth trend exists.
USD/JPY daily chart with support and resistance lines on it. Click to enlarge:
Let’s Start:
- Current Account: Monday, 23:50. Current account surplus was narrowed to 0.75T in July following 0.92T in the previous month. This reading is lower than the 0.99T predicted although exports are in a growth trend. A drop to 0.51T is expected now.
- BOJ Monthly Report: Tuesday, 5:00. The previous BOJ Monthly Report stated thatJapan’s economic activity is improving steadily, as supply chains are finally mended caused by the earthquake disaster. Production and exports have been steadily increasing approving pre-quake levels. Investment and private consumption are also on the rise indicatingJapan is on the right way to full recovery.
- Core Machinery Orders: Tuesday, 23:50. Core machine orders dropped 8.2% in July well above the 3.9% decrease expected and following 7.7% gain in the previous month. However in a yearly base core machine orders added 4.0%. a jump of 4.5% is forecasted.
- Prelim Machine Tool Orders: Wednesday, 6:00. Machine tool orders increased by 15.3% on a yearly base in August, this is the 21st consecutive improvement. July’s reading showed growth of 34.6% indicating expansion in the market.
- Monetary Policy Meeting Minutes: Wednesday, 23:50. A detailed report leading to the BOJ board members rate decision is always interesting to investors, revealing thorough analysis of economic conditions.
- Tertiary Industry Activity: Wednesday, 23:50. The service sector activity index decreased 0.1% in July following the 1.85 climb in the previous month. This reading was contrary to the 0.3% rise expected. The main contributors for this slide were technical services, communications, electricity and real estate. A drop of -0.3% is forecasted.
- CGPI: Thursday, 23:50. Japan’s corporate goods price index (CGPI) for August increased by 2.6%, a bit lower than the 2.7% predicted by analysts and following 2.9% increase in the previous month. This is the 11th straight increase. An increase of 2.5% is predicted.
- G20 Meetings: Fri-Sat. Friday. Finance ministers will gather in Pars to discuss proposals for global economic reform discussing the Financial Stability Board (FSB) recommendations regarding bank regulations and debt reduction especially inEurope which will increase tensions in the already troubled continent.
*All times are GMT
USD/JPY Technical Analysis
Dollar/yen continued to float in the range. Yet again, the pair crossed the 77 line (mentioned last week) only for a very short while. It eventually closed the week almost unchanged.
Technical lines from top to bottom
79.30 worked well as a stubborn resistance line for dollar/yen, putting down recovery attempts. With the current ranges, it remains far at the moment. Another move to the downside was seen after an attempt to break higher. 78.50 provided some support before another drop, and is a minor resistance line.
77.85 was was a swing high when the pair made an attempt to make an upwards move higher in September, and remains strong resistance. The peak of 77.22 seen early in October is another minor line.
The round number of 77, remains a significant cap for the range trading that characterizes the pair even though it was temporarily breached.
Further below we have the swing record low of 76.25 which is still of some importance. The low record of 75.95 is the final frontier in charted territory.
Below, the round number of 75 is the next potential cushion and an area where the Japanese authorities will be keen to intervene.
I remain neutral on USD/JPY.
The ultimate safe haven currency finds it hard to move, when all other currencies rock. It seems that the US economy is doing a bit better than the Japanese one. This was seen in the recent Non-Farm Payrolls. Also an intervention by the BOJ is always a possibility, yet it may take a long time until we see something.
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 the New Zealand dollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar
- For the Swiss Franc, see the USD/CHF forecast.
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