Dollar/yen continued to show limited movement last week. On the fundamental front, investors will be keeping a close eye on the Bank of Japan, which will make its rate announcement on Wednesday, July 15.

USD/JPY fundamental mover

Japanese consumer data headed downwards in May. Average Cash Earnings declined for a second straight month, with a decline of 2.1%. Household Spending plunged 16.2%, marking an eighth successive decline. Japan’s current account surplus jumped to JPY 0.82 trillion, up sharply from 0.25 trillion. Inflation remains at low levels. The Producers Price Index declined for a fourth consecutive month, with a decline of 1.6%.

In the US, the services sector showed a strong rebound in June. The ISM Non-Manufacturing PMI jumped to 57.1, up from 45.4 beforehand. This reading showed significant expansion. Unemployment claims continue to fall, albeit at a slow rate. Last week’s reading was 1.31 million, down from 1.42 million. The Producer Price Index disappointed. The headline read came in at -0.2%, while Core CPI declined by -0.3%.

USD/JPY Technical Analysis

• 110.63 has been a resistance line since late March.
• 109.73 is protecting the 110 level, which has psychological significance.
• 108.70 (mentioned last week) is next.
• 108.10 switched to resistance in early June, when USD/JPY fell sharply.
• 107.30 remains an immediate resistance line.
• 106.61 is the first line of support.
• 105.55 has held in support since mid-March.
• 104.65 is the final support line for now.
• The round number of 104 is next. It is the final support line for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am neutral on USD/JPY. The Japanese yen continues to drift, as investors have not snapped up the currency despite its reputation as a safe-haven in times of crisis. We could see the lack of direction continue for the pair.