The Japanese yen rebounded last week, as Dollar/yen slipped 2.5 percent. This week’s highlights include Japanese inflation and U.S. manufacturing PMI and unemployment claims.

USD/JPY fundamental mover

Inflation levels remain low in Japan. BoJ Core CPI, which is the bank’s preferred inflation gauge, dipped to 0.2% in February, down from 0.3%. In the minutes of the most recent BoJ policy meeting, policymakers noted that the economy was under strong pressure to the COVID-19 outbreak, which has caused financial instability in the markets.

In the U.S., the highlight was a staggering figure for unemployment claims, which hit 3.2 million. This was due to the shutdown of many factories and businesses across the country. The ISM Manufacturing PMI dipped to 49.2 in March, down from 50.8 a month earlier. It marked the first contraction since August. Elsewhere, durable goods orders in February were a mix. The headline figure jumped 1.2%, up from -0.2% a month earlier. However, the core reading declined by 0.6%, compared to a gain of 0.9% in February. GDP for Q4 showed a 2.1% in the third estimate, confirming the previous estimate.

See all the main events in the Forex Weekly Outlook

USD/JPY Technical Analysis

With USD/JPY posting sharp losses, we start at lower levels:

110.62 remains relevant as USD/JPY continues to show volatility.

109.73 is next.

108.70 (mentioned last week) has switched to a resistance role after USD//JPY posted losses last week.

108.10 is an immediate resistance line. It could see action early in the week.

107.30 is providing support. 106.61 is next.

105.55 was tested in March. It has some breathing room in support.

104.65 is the final support line for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I remain bearish on USD/JPY.

The Japanese yen has been unable to capitalize on the COVID-19 crisis, despite its reputation as a safe-haven in times of trouble. The greenback took a hit last week due to jobless claims, but the outlook for the dollar remains positive.