USD/JPY Forecast Aug. 31-Sep. 4 – Yen Jumps
Dollar/yen ended the week with slight losses, after the yen recovered with strong gains on Friday. In Japan, retail sales are expected to post a fifth straight decline, with an estimate of -1.7%. Industrial production is projected to gain 5.0% and Manufacturing PMI is expected to rise to 46.6, up from 45.2. The US releases ISM Manufacturing and Non-Manufacturing PMIs, as well as nonfarm payrolls and wage growth.
USD/JPY fundamental mover
The focus was on inflation releases last week. BoJ Core CPI, the preferred inflation gauge for the Bank of Japan, dipped from 0.1% to a flat 0.0%. Tokyo Core CPI declined by 0.3%, its sharpest decline since March 2017.
Over in the US, Conference Board Consumer Confidence slipped to 84.8, down from 91.7 beforehand. Durable Goods Orders were mixed – the headline reading accelerated 11.2%, up from 7.3% in the previous release. However, the core release slowed to 2.4%, down from 3.3% beforehand. US second-estimate GDP was upwardly revised to 31.7%, compared to 32.9% in the initial release.
Federal Reserve Chair Jerome Powell made a dramatic address at the Jackson Hole meeting. Powell said that the Fed would allow inflation to overshoot its inflation target of 2.0%. This significant shift in policy means that interest rates will likely stay very low for the foreseeable future. This resulted in broad losses for the US dollar last week.
USD/JPY Daily Chart
USD/JPY Technical Analysis
- 108.52 (mentioned last week) has provided resistance since early June.
- 107.18 is next.
- 106.44 remains relevant.
- 105.45 is an immediate resistance line.
- 104.50 is the first line of support.
- 103.52 has held in support since mid-March.
- 102.27 is the final support level for now.
I remain neutral on USD/JPY
Both the dollar and the yen have struggled despite their status as safe-haven assets. With the US Congress deadlocked over a stimulus package and the Japanese economy limping along, it could be a quiet week for the pair.
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