USD/JPY fundamental mover

Japan’s economic conditions have deteriorated sharply due to the impact of COVID-19. Japan’s current account surplus fell sharply to JPY 0.94 trillion in March, down from 2.38 trillion a month earlier. With oil prices plummeting, wholesale prices fell by 2.3% in April from a year ago, the sharpest decline since November 2016.

In the U.S., inflation tanked in April as the economy continues to buckle under the weight of the COVID-19 pandemic. CPI declined by 0.8%, down from -0.4% a month earlier. The core read fell by 0.4%, down from -0.1% in the previous release. Both figures missed their estimates.

Unemployment claims continue to fall and dropped below 3 million last week, with a release of 2.98 million. Still, this missed the estimate of 2.5 million. Retail sales were a disaster in April – the headline figure fell by 16.4%, while the core read declined by 17.2%. Analysts had projected declines of -12.0% for the headline and 16.4% for the core releases.

USD/JPY Technical Analysis

• We start with resistance at 110.62.
• 109.73 is protecting the 110 level, which has psychological significance.
• 108.70 is next.
• 108.10 has held in resistance since mid-March.
• 107.30 is an immediate resistance line.
• 106.61 is providing support. 105.55 is next.
• 104.65 has held in support since early March.
• 102.50 is the final support line for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am neutral on USD/JPY.

Both the Japanese yen and the U.S. dollar are considered to be safe-havens assets in times of trouble, so it’s not altogether surprising that USD/JPY has remained relatively steady since late March. This trend could continue next week.