Dollar/yen declined for a second straight week, as the pair fell below the 105 level. In the upcoming week, the Bank of Japan releases its rate decision. As well, we’ll get a look at BoJ Core CPI, the central bank’s preferred inflation gauge.                                                                                                                     

USD/JPY fundamental mover

Japan’s inflation remains at low levels, indicative of weak economic activity. In August, National Core CPI dipped to -0.3%, up from -0.4%. The index has failed to post a gain since February.

In the US, jobless claims sparkled, falling to 787,000, down from 898,000 beforehand. This was the lowest level since March, prior to the spread of Covid-19, which sent unemployment levels skyrocketing. Manufacturing PMI came in at 53.3, just shy of the estimate of 55.5 points. The Services PMI improved to 56.0, beating the estimate of 54.7 points. Both readings indicate expansion, above the 50-level which separates contraction from expansion.

See all the main events in the Forex Weekly Outlook

USD/JPY Technical Analysis

We start at the round number of 108, an important monthly resistance line.

107.29 (mentioned last week) is protecting the 107 level.

106.44 has held in resistance since the end of August.

105.45 is next.

104.50 is an immediate support level.

103.52 has held in support since March.

102.13 is the final support line for now..

USD/JPY Daily Chart

USD/JPY Sentiment

I am bearish on USD/JPY

The US dollar continues to struggle, and USD/JPY is close to its lowest level since March. With the US continuing to struggle to contain Covid-19, the dollar could lose more ground to the yen.