Dollar/yen recovered from the 15-month lows amid the upbeat meeting minutes from the Fed and as stock markets remained calm. What’s next? It’s a busy week in the US with Powell’s testimony, GDP and more, but also the mood is important as well.
USD/JPY fundamental movers
Fed minutes remain optimistic, Japan is calmer
The FOMC Meeting Minutes showed optimism about the economy and about inflation reaching its target. This was the main upwards driver of the US dollar. Fed speaker did not rock the boat too much, repeating the same messages from beforehand.
Japanese authorities did not like the rise of the yen, but as it began retreating once again, they refrained from talking about it too much. Japanese inflation came out marginally above expectations but are still far from 2%, at least on core figures.
Powell, GDP, Core PCE
The new Fed Chair Jerome Powell will testify for the first time and markets are waiting. He did not express any strong views in the past and this will be his first opportunity to lay out his vision. Markets will be waiting to hear if the Fed may raise rates more than three times in 2018 or if they stick to the three that are seen in the dot-plot.
Apart from that, GDP is expected to be downgraded from 2.6% to 2.5%. The Core PCE Price Index, the Fed’s favorite inflation measure, is projected to rise by 1.5% y/y once again. Durable goods orders and home sales also dot the calendar.
See all the main events in the Forex Weekly Outlook
Key news updates for USD/JPY
USD/JPY Technical Analysis
112.90 served as support in December and is a pivotal line in the range. 112.20 used to be important in the past.
It is closely followed by 111.70, which provided support back in October. The round level of 111 worked as a cushion to the pair in November.
Looking down, 110.70 was a separator of ranges in June and remains important. The round number of 110 serves as a psychological level.
109 was a pivotal line within the range. 108.30 was the low seen in late January. Even lower, we find 107.30 was the low in September and now turns into resistance.
106.50 was a resistance line in mid-February. The 105.55 low is the next line to watch, serving as a low point around the same time.
If the pair falls even lower, the round number of 105 will come into play, followed by 103.30.
USD/JPY Daily Chart
I remain bearish on USD/JPY
The pair made its consolidation, but may now extend its falls, especially if Powell provides a “Powell Put”.
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