Dollar/yen posted gains of 1.2% last week, recovering the losses from the previous week. Investors will be keeping a close eye on U.S. inflation and retail sales report in the upcoming week.

USD/JPY fundamental movers

In the U.S., business activity continues to expand, as Services PMI improved to 55.0, up from 53.9 points. However, employment numbers for December were a major disappointment. Nonfarm payrolls fell to 145 thousand, compared to 266,000 a month earlier. This missed the estimate of 162,000. Wage growth slipped from 0.3% to 0.1% and fell shy of the forecast of 0.1%. The unemployment rate was unchanged at 3.5%.

In Japan, consumer confidence remains low. The indicator came in at 39.1, shy of the estimate of 39.6 pts. Household spending fell for a second straight month, with a reading of -2.0%.

See all the main events in the Forex Weekly Outlook

USD/JPY Technical Analysis

We start with resistance at 113.15.

112.73 had held in resistance since December 2018.

112.25 is the next resistance line.

111.62 has been a resistance line since April 2019. 110.62 is next.

109.73 remains relevant. It is a weak resistance line.

109.35 is an immediate support level.

108.70 has switched to support after strong gains by USD/JPY last week.

108.10 is next.

107.30 (mentioned last week) has provided support since early October 2019.

106.61 is next.

105.55 has held in support since late August. It is the final support level for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am bearish on USD/JPY

The U.S. and Iran appear to have stepped down after the U.S. killing of an Iranian general and a missile attack against U.S. bases by Iran. This could raise risk appetite and extend the yen’s slide.