Dollar/yen posted gains for a second straight week, as the pair punched above the symbolic 110 level for the first time since May. The Bank of Japan will be in the spotlight, as it announces it rate decision on Tuesday. Investors will be combing through the rate statement, looking for hints of any changes in monetary policy.

USD/JPY fundamental movers

Japan’s current account surplus rose to JPY 1.79 trillion, up from 1.73 trillion in the previous release. This was the highest current account surplus recorded in four months. Core machinery orders rebounded strongly after four straight declines. The indicator climbed 18% in November, crushing the estimate of 3.1 percent.

It was a busy week in the U.S. and key consumer releases were mixed. Retail sales, the primary gauge of consumer spending, were positive in December. The headline reading improved to 0.3%, up from 0.2% a month earlier. Core retail sales impressed with a gain of 0.7%, above the estimate of 0.5%. The strong numbers were a result of a late-holiday shopping spree by consumers. Consumer inflation has been losing ground and remains below the Federal Reserve target of 2.0 percent. The downturn continued in December. CPI slowed to 0.2%, compared to 0.3% a month earlier. Core CPI dipped to 0.1%, down from 0.2%.

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 switched to a support role early in the week as USD/JPY posted gains.

109.35 is the next support level.

108.70 has some breathing room after 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 the final support level for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am bearish on USD/JPY

The U.S. dollar continues to post broad gains and pushed the yen below the 110 line. With risk appetite rebounding after U.S. tensions have subsided, the yen slide could continue.