Dollar/yen sustained its sharpest loss since early June, with a decline of 0.8%. On the fundamental front, it’s a busy week in Japan. The BoJ releases the summary of opinions of the July meeting, as well as BoJ Core CPI, the bank’s preferred inflation gauge. Retail sales, which has posted three consecutive declines, is expected to come in at -6.0%.  

USD/JPY fundamental mover

Japan’s exports fell by over 20% for a third straight month and the country posted a trade deficit of 42 trillion yen, down from 60 trillion yen beforehand. On the inflation front, National Core CPI improved to 0.0%, after two straight declines of -02.%.

US weekly unemployment claims were higher than the previous week, breaking an extended downward trend. Last week’s reading of 1.41 million was up from 1.30 million. Analysts had expected jobless claims to remain steady at 1.3 million.

The US Manufacturing PMI has been showing contraction for the past four months, with readings below the 50-level. Still, the index has been moving upwards and showed strong improvement in June, climbing from 39.8 to 49.6. The upswing continued in July, with a reading of 51.3, but this was shy of the forecast of 52.0.

USD/JPY Technical Analysis

• 109.73 (mentioned last week) is protecting the 110 level, which has psychological significance.
• 108.73 has provided resistance since early June. 108.26 is next.
• 107.17 has some breathing room in resistance, following losses by USD/JPY this week.
• 105.98 is an immediate support level.
• 104.65 has provided support since March.
• The round number of 104 is next.
• 102.27 is the final support line for now.

USD/JPY Daily Chart

I remain neutral on USD/JPY

The yen climbed last week, although this was a case of broad dollar weakness, rather than strength on the part of the yen. Investors have not flocked to the yen during the COVID-19 crisis despite the currency’s reputation as a safe-haven in times of trouble.