USD/JPY climbed nicely and managed to close the week higher reaching the highest levels in a month. Will this trend continue? Retail sales and Tokyo Core CPI are the major events on out menu this week. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
The absence of QE3 from the FOMC decisioncertainly pushed the pair higher. Last week Bank of Japan Governor Masaaki Shirakawa spoke in Tokyo about the global market turmoil following the pro-bailout Greek election outcome saying Japan has to monitor developments in the EU and watch from a worsening of EU stability in the near future. He also referred to the moderate growth rate of Japan’s domestic market claiming it is on the right path to recovery and that he BOJ will increase its asset purchases by Y19 trillion to Y70 trillion by the end of June 2013 to boost growth. Will Japan succeed to maintain a recovery trend?
USD/JPY daily chart with support and resistance lines on it. Click to enlarge:
* All times are GMT
USD/JPY Technical Analysis
Dollar/yen kicked off the week with a small rise that became stronger. After conquering the round number of 80 (mentioned last week), it never looked back and stopped only at the 80.60 line before closing a bit lower.
Technical lines from top to bottom
We start from a higher point this week. 84 was the peak reached in March and remains a tough spot. 83.20 provided support when the pair traded on high ground and it then switched to resistance.
82.87 is a veteran line – that’s where the BOJ intervened for the first time back in 2010. 81.80 capped the pair in April.
81.43 is stronger after serving as resistance for a recovery attempt. 80.60 provided support for the pair around the same time, and served as a bouncing spot for the next moves. It proved its strength as resistance in June 2012.
80.20 separated ranges in May 2012 and remains another barrier after 80 on the upside. The round number of 80 is psychologically important, even though it was crossed several times in recent months. It is stronger now.
79.70 was a cap was seen in June 2012. The round number of 79 served as a bottom in May 2012 but is now weaker after the fall.
78.30 capped a second recovery attempt in November, after the intervention and had an important role earlier as well, working as support. This is a key line after the fall.
77.50 was the bottom border of a range the pair had at the end of 2011. It is followed by 77, which is only minor support.
76.60 was a cushion for the pair at the beginning of the year and is rather strong. 76.26 is the next line on the downside after working as a support quite some time ago.
Since the beginning of June, the pair has been trading in an uptrend channel. Note that uptrend support is more significant than uptrend resistance, and that the pair is close to resistance now.
I am bullish on USD/JPY.
Without QE3 in the US and with the impact of European troubles having a lower impact for the yen, there’s room for more rises after the pair crossed the 80 line.
Another note: USD/JPY is the most predictable currency pair for Q2.