Dollar/yen drifted last week, as the pair remains close to the 108 level. Investors will be keeping an eye on household spending, an important gauge of consumer spending. Analysts are braced for a huge drop of 12.8 percent in April. The U.S. will release manufacturing and services PMIs as well as nonfarm payrolls and wage growth.

USD/JPY fundamental mover

Inflation levels remain low in Japan. Bank of Japan Core CPI, the bank’s preferred inflation gauge, fell by 0.1% in March, the first decline since March 2017. There was grim news from manufacturing and consumer spending in April. Preliminary Industrial Production fell by 9.1%, while consumer spending sank by some 13.7 percent.

In the U.S., consumer confidence improved in May, as the CB consumer index came in at 86.6, up from 85.7 a month earlier. First-quarter GDP was revised downwards to -5.0%, compared to -4.8% in the initial estimate. Durable goods plunged in April, with the headline figure falling by 17.2% and the core reading falling by 7.2 percent. Unemployment claims continue to fall, with 2.12 million new claims last week. This was slightly higher than the forecast of 2.10 million and raises the total during Covid-19 to a staggering 41 million.

See all the main events in the Forex Weekly Outlook

USD/JPY Technical Analysis

We start with resistance at 110.62.

109.73 is protecting the 110 level, which has psychological significance.

108.70 (mentioned last week) is next.

108.10 has held in resistance since mid-March.

107.30 remains a weak support level. 106.61 is next.

105.55 has held in support since mid-March.

104.65 is the final support level for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am neutral on USD/JPY.

The Japanese yen has been relatively quiet in the month of May, and even a dismal GDP out of the U.S. in the first quarter didn’t move the pair. Still, the U.S. economy remains in better shape than that of Japan, which could help the greenback make inroads against the yen.