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USD/JPY Forecast For March 31 – April 4

USDJPY had a great Friday and managed to close the week on green. The quotation stopped at resistance level from 102.80 after the whole week was on the downside. The macroeconomic data from Japan was predominantly good. The retail sales y/y beat the expectations while the unemployment fell from 3.7% to 3.6%. However, the household spending y/y was published way below the expected value, an aspect the markets did not ignore and it prompted some concerns.

The explanation for the appreciation of the Japanese yen in the first part of the week would be the geopolitical conflict between the US and Russia, a type of situation that encourages investors to buy safe haven assets. Also, you should take into consideration the reaction of the markets, which suggested through the price action that they are not so scared anymore of a war and hope that the tensions will be over and the two historic giants will make peace.

Economic Calendar

Manufacturing PMI (12:15 GTM)-Monday. It is a leading indicator of economic health and basically it is an index based on surveyed purchasing managers in the manufacturing industry. Above 50.0 indicates industry expansion whereas below indicates contraction. Last month the actual published value was 55.5.

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Housing Starts y/y (6:00 GTM)-Monday. It is a low impact indicator that measures the change in the number of new residential buildings that began construction. This indicator it is considered a leading one of economic health because building construction produces a wide-reaching ripple effect. In February we had an increase of 12.3% while for March it is forecasted an increase of 5.2%, so it will interesting to follow if we will witness a cooling effect in the real estate sector.

Tankan Manufacturing Index (12:50 GTM)-Tuesday. It is a medium impact indicator because manufacturing plays a critical role in the Japanese economy and this survey it is considered the best gauge of the industry’s health due to its large sample size and respected source. Last quarter the value published was 16 and for this quarter it is expected a value of 19, which would mean that the manufacturing sector does really well.

Tankan Non-Manufacturing Index (12:50 GTM)-Tuesday.  This indicator is an index which is based on surveyed large businesses, excluding the manufacturing industry. It is considered a leading indicator of economic health. Usually it has a medium impact on the markets and it will be interesting to pay attention to it as the value forecasted for this quarter is the best one since 2007.

Average Cash Earnings y/y (2:30 GTM)-Tuesday. This one measures the change in the total value of employment income collected by workers and it has a medium impact on the markets. The traders care about this indicator because income is correlated with spending. Last month was in the negative territory with a reading of -0.2% and this month it is projected to continue this trend with a decrease of   -0.1%.

Technical View

USDJPY, Daily

Support: 102.00, 101.20

Resistance: 103.70, 104.30

usdjpy-daily-forecast-april-31-04-resize-30.03.2014

The descending trend line looks like it holds very well as the price was rejected at crossover of the trend line and the resistance area from 103.00. The MACD Histogram shows us that the price has a recovery period while the Exponential Moving Average of 100 days points towards the key support area from 102.00 level. So, there are high chances to see a retracement to the psychological level from 102.00 that would also be in correlation with the descending trend motion.

USDJPY, H1

Support: 102.50, 102.00

Resistance: 103.00, 103.35

usdjpy-h1-forecast-april-31-04-resize-30.03.2014

After the rally the USDJPY had Friday, the buyers look tired as the RSI oscillator is in the overbought zone and the MACD Histogram is on a descending path. Also, the closing day candlestick has a big superior shadow that suggests bearishness. So, in the first part of Monday trading session we could see a retracement to 102.50 level and whether it will close below that level could tell us the direction of the day.

Bullish or Bearish

Based on the technical part and fundamental as well, I expect to see in the following week a moderately bearish movement from the USDJPY. The price action could go sideways for some periods, but towards the end of the trading sessions, I expect that the bears to be in control and push down the price.

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USD/JPY Forecast For March 31 - April 4 by
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