Dollar/yen posted moderate gains for a second straight week, as the U.S. dollar was broadly higher last week. The Bank of Japan is not showing any inclination of changing its monetary policy, but investors will nonetheless be all ears as Governor Kuroda speaks on Monday. In the U.S., Federal Reserve Chair Jerome Powell testifies before congressional and senate committees and the U.S. will release inflation reports.

USD/JPY fundamental movers

The Japanese Tankan indices were mixed. The manufacturing indicator slipped to 7, missing the estimate of 9 points. The services sector has been much stronger, and the index climbed to 23, beating the forecast of 21 points. Housing spending sparkled, with a gain of 4.0%. This was its sharpest gain since April 2015.

In the U.S., the services sector PMI continues to indicate expansion, but slowed in May. The ISM Non-Manufacturing PMI disappointed, slowing to 55.1, down from 56.9 a month earlier. This missed the estimate of 56.1. Key employment numbers were a mix in June. Wage growth remained stuck at 0.2% for a third successive month. Nonfarm payrolls rebounded with a strong gain of 224 thousand, crushing the estimate of 224 thousand. The unemployment rate ticked up to 3.7%, above the estimate of 3.6%.

See all the main events in the Forex Weekly Outlook

USD/JPY Technical Analysis

111.69 was the high point of the yen rally in the first half of May. 111.15 follows.

110.40 (mentioned last week), is the next resistance line.

109.73 has held in resistance since the end of May. 109.35 is close by.

108.70 was last tested in mid-June.

108.10 remained relevant last week. This line was a swing low in late May.

107.50 has switched to a support role after gains by USD/JPY. It capped the pair in early April. 106.61 is next.

105.55 has held in support since early January.

104.65 is the final support level for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I remain bullish USD/JPY.

An excellent U.S. nonfarm payroll report pushed the dollar higher late in the week, and stronger risk appetite could weigh on the yen. The U.S. economy is performing well, and if Jerome Powell dampens expectations of a rate cut in September, the dollar could continue to point upwards.