Dollar/yen posted slight gains for a second straight week. Japanese consumer numbers are expected to be soft in the upcoming week. Tokyo Core CPI is projected to drop by 0.2%, while retail sales is expected to slide by 11.2 percent. In the U.S., second-estimate GDP for Q1 is expected to confirm the initial read of -4.8 percent. Durable goods is expected to fall by 17.9% and personal spending by 12.6 percent.
USD/JPY fundamental mover
Japan’s economy sank into a recession, as the economy contracted by 0.9% Q1. The economy contracted in Q4 by 1.6%. Manufacturing indicators fell and the trade deficit widened to JPY 1.00 trillion, as exports declined by 22% in April. The BoJ held an unscheduled meeting in which it offered more credit for struggling businesses, but it did not make any changes to monetary policy.
In the U.S., construction numbers softened in April. Building Permits fell to 1.07 million, down from 1.35 million. Housing starts slowed to 0.89 million, down from 0.95 million. In March, the final read for Manufacturing PMI came in at 41.5 points, and the initial estimate for April came in at 39.8 points. A reading below the 50-level points to contraction.
USD/JPY Technical Analysis
- We start with resistance at 110.62.
- 109.73 is protecting the 110 level, which has psychological significance.
- 108.70 is next.
- 108.10 has held in resistance since mid-March.
- 107.30 remains relevant. Currently, it is an immediate support level. 106.61 is next.
- 105.55 has held in support since mid-March.
- 104.65 is the final support level for now.
USD/JPY Daily Chart
USD/JPY Sentiment
I am bullish on USD/JPY.
The Japanese yen continues to hold its own against the U.S. dollar, as both currencies are considered safe-haven assets. Still, the U.S. economy is in much better shape than that of Japan, which could help the greenback make inroads against the yen.
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