USD/JPY Forecast March 17-21

The Japanese yen was supported at first by China and then by Ukraine, that made a comeback to the limelight. Trade balance is the big event after a busy week. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

Q4 growth was revised to the downside, to 0.2%, as expected. This adds pressure for more fiscal and monetary stimulus. Worries about growth in Chinaserved as the safe haven trigger and this was yen positive, allowing consolidation after the recent rise. The rate decision in Japan offered little, but the BOJ may still act in April. Everything is possible. In the US, figures were OK, but not more than that. The Ukraine story could continue dominating the scene for some time.

Updates:

USD/JPY graph with support and resistance lines on it. Click to enlarge:

1. Trade Balance: Tuesday, 23:50. Since the terrible earthquake, tsunami and nuclear tragedy 3 years ago, Japan needs to import energy at a much greater scale, shifting its trade balance to negative. After a deficit of 1.82 trillion yen in January, a smaller one is likely now.
2. All Industries Activity: Wednesday, 4:30. This figure by METI disappointed with a drop in December. After the 0.1% slide, an increase of a similar scale is expected.

* All times are GMT.

USD/JPY Technical Analysis

Dollar/yen began the week with a slide to the 102.74 line (mentioned last week), practically erasing the jump higher. It then changed course and found support only above the 101.35 line.

Technical lines from top to bottom

The top line is the peak seen in the turn of the year: 105.44. This was challenged several times. Below, 104.80 capped the pair during January.

Below, 103.77 provided support for the pair in January and served as a clear separator of ranges. 102.74 was a stubborn peak during February and is the top line of the current trading range.

102 is a round number that provided support to the pair in late January and is now a pivotal line in the range.

101.35 replaces the previous peak of 101.44 after working as support in February. 100.75 was a cushion for the pair during several days earlier in the year and is the last defense before the very round number.

100 is the ultimate support line and the last line for now.

I am neutral on USD/JPY

While the fears regarding China are already priced in, Ukraine returned to be a wild card. So, we could see the yen strengthening, depending on the events in Crimea over the weekend. However, the intent of the Fed to taper once again can turn the pair upwards once again.