Dollar/yen showed limited movement last week. Central banks will be in focus in the upcoming week. The Bank of Japan releases the minutes from the February policy meeting, while the Federal Reserve will publish a policy statement. The Fed is virtually certain to leave rates unchanged at the March meeting, as the dovish stance could last into the second half of the year.

USD/JPY fundamental movers

In the U.S., consumer numbers were a mix last week. Core retail sales jumped 0.9%, marking an eight-month gain. However, inflation levels remain sluggish, with CPI coming in at 0.2% and Core CPI at 0.1%. As well, jobless claims climbed higher than expected.

Federal Reserve members have been signaling that the Fed could stay on the sidelines until the second half of 2019, and this stance was underscored by Fed Chair Powell in a television interview last week. Powell left no doubt about where the Fed stands, saying that the Fed would remain patient and was in no hurry to change interest rate policy. The Bank of Japan is reluctant to change current policy, but if the yen appreciates due to the global economic downturn, the BoJ could introduce additional stimulus in order to keep the yen in check and protect the export sector.

See all the main events in the Forex Weekly Outlook

USD/JPY Technical Analysis

115.55 was a high point in the first half of 2017 and remains an upside target. 114.60 was the high point in early October and has held in resistance since then.

114.25 was the high point in November. 114 is a round number and was a stepping stone on the way down. Close by, 113.80 was a resistance line in November.

113.15 was a swing high back in July.

112.73 was an important resistance line in October.

112.25 defends the 112 level. This line was tested earlier in March and could find itself under pressure if the yen loses ground.

111.65 was a swing low in October, Close by, 111.40 was another swing low in October.

111.15 (mentioned last week) remains relevant and starts the week as a weak line. 110.40 provided support in early September.

Close by, 109.35 was a cushion in mid-July.

108.70 was a cushion early in the summer and 108.10 a swing low in late May.

USD/JPY Daily Chart

USD/JPY Sentiment

I am neutral on USD/JPY

The yen is a key safe-haven asset, but risk apprehension remains low, so the yen has limited attraction. With interest levels in negative territory, parking funds with the BoJ is not a salivating option for investors. At the same time, investors are keeping a close eye on Brexit and the U.S-China trade war, and any deterioration in these hot spots could quickly increase demand for the Japanese currency.