This week Japan posted mixed data on the economic calendar. Monday was bank holiday, but from Tuesday the publishing started. The Current Account, Bank Lending, 30-y Bond Auction, Prelim Machine Tool Orders came in line with the expectations. While the Economy Watchers Sentiment, Core Machinery Orders and CGPI came above analysts’ expectations, the M2 Money Stock, Tertiary Industry Activity and the Consumer confidence disappointed the markets with lower readings than analyst forecasted for this month.
In the beginning of the week the Japanese yen gained some terrain but the appreciation did not last too much because the dollar fought back and closed the week on positive ground. Investors have favored the US dollar even though the economic data posted for the United States this week were not surprisingly good. Most of them were in line with expectations and bellow.
Continue reading this article to find out more about what are the expectations from the macro economic releases and the technical analysis for next week.
Revised Industrial production – Monday (4:30 GMT). This is the change in total inflation adjusted value of output produced by manufacturers, mine and utilities. In December it had 1.0% gain and for next week it is expected to rise with 0.1%. This is usually a low impact indicator, which might not influence to much the USD/JPY currency pair.
Monetary Policy Statement – Wednesday (it is not set an hour). This along with the BOJ press conference will be the highlight of the week. The Japanese Central Bank remained dovish and in their last policy meetings said about the same thing. If nothing will change in their monetary policy then we could expect for the Japanese yen to continue its drop at the same speed or even faster.
All Industries Activity – Wednesday (4:30 GMT). Published -0.2% in December, this week the expectations are of 0.4% growth. Known as a low impact indicator, if the actual reading will be a big surprise, the market might become volatile.
WEF Annual Meetings – Start on Wednesday, end Friday. It contains the statistical data that the BOJ Policy Board members evaluated when making the latest interest rate decision, and provides detailed analysis of current and future economic conditions from the bank’s viewpoint.
Support: 103.82, 103.00, 102.00;
Resistance: 105.41, 106.00, 107.00;
Last week the price of USD/JPY has hit the 103.00 round number level and bounced back to hit a high for the week at 104.91. At this point we can see that lower lows and lower highs were drawn on the chart. Taking this into consideration we can assume that a down trend is in place. But I believe that the dollar could get stronger during next weeks and might even break the current high, 105.41.
Support: 104.14, 103.80;
Resistance: 104.44, 104.90, 105.41;
As we thought and stated in our last forecast of USD/JPY, the price bounced right over 102.85 and retested the ex-support 100 pips higher at 103.80. It didn’t stop there because the US dollar continued its rally all the way to 104.90. In the last trading hours the price of this pair has consolidated between the 104.41 local support level and 104.44 local resistance. A drop below the support could trigger a low term move to 104.14, while a breakout above the resistance could trigger a rally which will retest the 104.90, last week’s high.
Bullish or Bearish
On medium term, I would remain bullish on the US dollar and bearish Japanese yen. A daily close above last week’s high cu trigger a rally to 105.40 or even higher. On the short term, I would wait for the Monday open to see which local support/resistance level will fell first and then select a direction.
Sideways moves are always helpful, but don’t forget to keep an eye open for false breakouts!