An interesting week in which USDJPY had a bumpy road, that ultimately turned into the appreciation of the US dollar in front of the Japanese yen breaking the 102 level and closing the week at 102.25. The macro indicators were in favor of the US dollar as the macroeconomic data from the Nippon economy disappointed once again. The trade balance was published below expectations with a deficit of 1.13T while the All Industries Activity indicator was printed at 1% whereas the forecasted value was 1.3%.
Besides all these, the newly crowned FED Chairman, Janet Yellen, managed to surprise the audience and the markets with an unexpected answer to the question, how much “considerable time” means in terms of the length of time when the Federal Reserve will raise the interest rates after the tapering comes to an end. Her answer, “around six months”, induced some panic in the markets, which was beneficial for the US dollar and hurt the capital markets and gold.
CSPI y/y (7:50 GTM)-Tuesday. This is a low impact indicator that measures the change in the price of services purchased by corporations. It is a leading indicator of consumer inflation because the higher costs are usually passed on to the consumer. Last month was 0.8% and this month is expected to have the same value, so if it will be published below expectations could make an impact on the markets.
Household Spending y/y (7:30 GTM)-Thursday. It represents the change in the inflation-adjusted value of all expenditures by consumers and has a medium impact on the markets. It is considered one of the most important indicators of economic health, so you should pay attention to it as it is expected to be published at 0.3%, a pretty low value and any surprise could cause some volatility.
Tokyo Core CPI y/y (7:30 GTM)-Thursday. This indicator measures the change in the price of goods and services purchased by consumers in Tokyo, excluding fresh food. It has a medium impact because Tokyo is Japan’s most populated city. This month is expected to be 0.9%, the same value as last month.
Unemployment Rate (7:30 GTM)-Thursday. This indicator tends to have a muted impact relative to employment data from other countries because the Japanese economy is more reliant on the industrial sector than personal spending. It is expected to be at the same level as in the last two months, 3.7%.
Retail Sales y/y (7:50 GTM)-Thursday. It is the primary gauge of consumer spending, which accounts for the majority of overall economic activity, so it has a medium impact on the markets. Last month it came pretty good at 4.4% while for this month it is forecasted to be at 3.6%, so keep an eye on this indicator because could cause some volatility.
Support: 101.20, 100.00
Resistance: 102.80, 103.70
The daily chart paints a descending trend which slowly, but surely goes towards 101, 100 levels that could prompt from BoJ further monetary stimulus. For the moment, it appears that the price still looks for some direction. In the week to come, we could see in the first part a rise towards the trend line and a rejection that could send the price the 102 level. However, pay attention to the diplomatic battle between Russia and the US as some unexpected situations could stir some volatility.
Support: 102.00, 101.20
Resistance: 102.80, 103.40
A descending channel seems to have formed after the spike caused by the pro dollar statements of Janet Yellen. If it is to be continued the downwards movement, on the short term we can see a close below the support line from 102.00 that could accelerate the negative price action and even send the price to the local low from 101.20.
Bullish or Bearish
Overall, I think this week has big chances to resemble with the last one as we may experience again some ups and downs without a clear direction of the price. That is why I see the price to be moving sideways in a range, but you should also be aware of some unexpected event that could give the price a clear direction.