USD/JPY Outlook – October 4-8

8

A rate decision is the highlight of a busy week in Japan. Here’s an outlook for Japanese events, and an updated technical analysis for USD/JPY. Will we see another intervention?

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

dollar yen forecast october 4-8

It took some time, but the results of the big intervention in the yen have been eroded. Will the BOJ move again, or hope for some dollar strength? Let’s start:

  1. Monetary Base: Sunday, 23:50. This indicator shows the change of money in circulation. The BOJ wants to see more money in circulation in order to stimulate the economy. After a growth rate of 5.4% last month, 5.8% is expected now.
  2. Average Cash Earnings: Monday, 12:30. This figure combines employment and inflation. The past two months saw significant growth rates in the money received by workers – 1.8% and 1.4%, pushing the yen higher. Another rise is expected now – 0.8%.
  3. Rate decision: Tuesday morning. The BOJ returns to another scheduled meeting. There’s no chance of a hike in the rate, at 0.10%. The central bank will discuss the results of the intervention, currently unsuccessful, and may hint about further interventions. The wording at the press conference usually rocks the currency more than the decision itself.
  4. BOJ Monthly Report: Wednesday, 5:00. This statistical report will be interesting to watch as it summarizes September, the month of the big intervention. Future expectations also rock the currency.
  5. Leading Indicators: Thursday, 5:00. The composite index consists of 12 economic indicators, most of them already released earlier. Nevertheless, it has some impact on the yen. Another rise in the indicator is expected now, after reaching 100.
  6. Monetary Policy Meeting Minutes: Thursday, 23:50. Two protocols will be released this time, one for the scheduled meeting and one for the emergency meeting before the intervention. It will be interesting to see what the central bank thought about the results of the move.
  7. Economy Watchers Sentiment: Friday, 5:00. 2000 workers are surveyed for this PMI-like figure that has been under 50 for quite some time. Another dip is expected now – from 45.1 to 44.8 – deep pessimism.

All times are GMT.

USD/JPY Technical Analysis

After being supported above 84.11, dollar/yen fell and didn’t look back. It found new support at 83.15 twice during the week, before closing at 83.21.

83.15 provides strong support for the yen after the past week’s support. This area also worked as support just before the intervention.

The next line of support is 82.87, the year-to-date low (also a 15 year low). Even lower, 80.43 was the lowest point back in the 90s. The BOJ is likely to intervene long before the pair reaches this low.

Looking up, 84.11, which provided support in the past week and also beforehand, is now a strong line of resistance. It’s followed by 84.72, which is a minor support line after working as such in February.

Higher,  85.90 line is the peak that USD/JPY reached after the intervention, and serves as the next resistance line.

86.35 was a support line in July and later became a resistance line. It’s closely followed by 86.88, that worked as support earlier. The last line for now is 88.10, which was a support line in March and later worked as resistance.

I am bullish on USD/JPY.

The pair is near the levels of the previous intervention. Apart from a new move by the BOJ, the dollar could retrace its heavy losses in recent weeks.

Further reading:

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free..

Get the 5 most predictable currency pairs

About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

8 Comments

  1. we are now in the sixth month of decline, you have to go back to August 1, 2003 for the last time we had a six month decline, the back to Jan 1, 1993 for more then a six month decline, wounder where the USDJPY will be next month.

  2. Pingback: FOREX-Dollar pushes back vs yen in short-covering rally – Reuters | Google News | 17 Sleeve

  3. Pingback: The Stock Tutor » Blog Archive » No Stopping Yen as Euro Reaches Parity in Top Markets Forecast – Bloomberg

  4. I find the usd/yen pair to be quite difficult to trade lately. However, I am bullish on the pair too.

  5. I sure agree. There will probably be a post about the unpredictable pairs tomorrow…

    Thanks,
    Yohay.

  6. Hi Yohay,

    Looking at the chart of USDJPY we can see that before the crisis began the dollar was strong and the yen was weak (relatively). And now, when the pair hits the 15Y low, it`s vice verse. So, if BOJ`s looking for a way to weaken yen, why FED`s trying to weak the dollar by intervention also (QE)? Probably I just misunderstood smth, here. Could you please sort the things out?

    Thanks in advance. Vladimir.

  7. Vladimir, you understood everything perfectly well. Indeed, both countries are trying to weaken their currencies. It seems that at least now, the Fed is bigger and stronger…

  8. Pingback: Asian Stocks Advance on China Growth Hopes; BHP, Hyundai Climb – BusinessWeek | The Fresno News