Last week closed almost unchanged for the USDJPY, although the economic data published surprised with better than estimates readings. The biggest surprise came from the National Core CPI which rose at 1.3%, surpassing the forecasts with 0.1%. A disappointment was the Prelim Industrial Production which rose with 1.1% and it was expected a 1.3% growth.
Investors took into consideration the fact that the inflation is heading the right way for Japan and they trust the country’s economy, so they bought the yen even though the US dollar was tempting. Let’s not forget that the Fed cut another 10B from the QE program and the economic releases were quite good. Continue reading this article to see what you can expect from this week.
Monetary Base – Monday 23:50 (GMT). It is the change in total quantity of domestic currency in circulation and current account deposit held at the BOJ. This is a low impact indicator. It is expected for the monetary base to rise with 47.2% this month.
10-y Bond Auction – Tuesday 3:45 (GMT). The average yield on the 10 year bonds that government sell at this auction continued to be on a run. This month it isn’t expected any big change.
Average Cash Earnings – Wednesday 1:30 (GMT). The change in the total value of employment income collected by workers rose during the past months. This month it is expected to grow with 0.7%.
Leading Indicators – Friday 5:00 (GMT). This is the level of a composite index based on 11 economic indicators. This Friday’s expectations are of 111.9%.
As we can see there are no important indicators to be published for Japan’s economy, but there will be some interesting events for the USA. Do not forget that the ADP Non-Farm Employment Change will be published on Wednesday and on Friday the Non-Farm Payrolls and the Unemployment Rate.
Support: 101.00, 100.00, 99.00;
Resistance: 102.00, 103.00, 104.00
This week, the Japanese yen had a very good start. It rallied almost 0.9% in front of the US Dollar. Looking at the daily chart we can observe that it respected all our past support levels put on round numbers. Now the price hit 101.00 where it is also found the 50% retrace from the full uptrend. Even though it is pretty clear that the yen is strengthening in this period but it doesn’t mean that the dollar doesn’t have anything to say.
Support: 101.00, 100.00;
Resistance: 101.50, 102.00;
On a lower time frame the trend is down. At this moment the price dropped and the RSI touched the oversold level. This could be a reversing signal. A close on the 60 minutes chart under the 101.00 level would sustain the strengthening of the yen, but we should expect a correction any moment now. If any bullish signal is given I would expect a retest on the 101.50 or 102.00 levels.
Bullish or Bearish
On the long term I still go with the US Dollar. On the medium term the yen gives strong buying signals and I believe that the price could keep on falling in this first part of the week. On the lower time frame and intraday lookout I would rather be very careful, because there are chances for the US dollar to rally.