Dollar/yen settled down and showed limited movement last week. Japan releases Industrial Production and Retail Sales.

The US releases ISM Manufacturing PMI, which continues to show strong expansion. On Friday, the US releases nonfarm payrolls, which should be treated as a market-mover.

USD/JPY fundamental mover

In Japan, all three releases last week were inflation events. The Services Producer Price Index (SPPI) came in at -0.6% in October, its first decline since May 2013. This was followed by BoJ Core CPI, which is the Bank of Japan’s preferred inflation gauge. The index came in at 0.0%, where it has hovered for most of 2020. The week wrapped up with a soft Tokyo Core CPI, which came in at -0.7%, its fourth straight decline.

In the US, PMIs for October indicated stronger growth in the manufacturing and services sectors. Services PMI improved to 57.7, as the index accelerated for a seventh straight month. Manufacturing PMI climbed to 56.7, up significantly from 53.3 beforehand. Both PMIs were well into expansionary territory, which indicates that the economic recovery continues to gain traction. Unemployment claims climbed for a second straight week, with a reading of 778,000. This was much higher than the estimate of 732,000. Durable goods orders reports were mixed. The headline figure slowed to 1.3%, down from 1.9%. However, the core release climbed from 0.8% to 1.3%.

The week wrapped up with the FOMC minutes of the November policy meeting. The minutes showed that officials did not believe any changes were needed to the current bond-purchase scheme of $120 billion/month. At the same time, they were of the opinion that “circumstances could shift to warrant such adjustments.”

See all the main events in the Forex Weekly Outlook

USD/JPY Technical Analysis

107.02 (mentioned last week) is an important monthly resistance line.

105.84 is next.

104.94 switched to a resistance role in mid-November, as the yen posted a strong rally.

104.11 is an immediate resistance line.

103.28 is the first support level.

102.13 has provided support since March.

101.52 is next.

99.98 has held in support since late August. It is the final support line for now.

.USD/JPY Daily Chart

USD/JPY Sentiment

I am bearish on USD/JPY

The yen has made inroads against the US dollar, which has been in retreat mode in recent months. With dollar weakness expected to continue, the yen could continue to gain ground this week.