USD/JPY Forecast May 5-9

The Japanese yen traded in range for some time and eventually made a move higher. The meeting minutes from the BOJ as well as their outlook are the main events. Here is an outlook on the major events moving the yen and an updated technical analysis for USD/JPY.

The Bank of Japan left its monetary policy unchanged and remained upbeat regarding the economy. This comes despite a weaker than expected growth in industrial output and a worrying manufacturing PMI. In the US, the excellent Non-Farm Payrolls report showed a gain of 288K jobs countering a poor GDP growth figure for Q1.

Updates:

• May 5, 16:00: ISM Non-Manufacturing PMI 55.2 in April – better than expected: ISM Non-Manufacturing PMI at 55.2 points on April 2014. The US economy continues growing steadily according this number. The ISM Non-Manufacturing purchasing managers’...

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

1. Markit Services PMI: Tuesday, 23:15. In March, Japan’s services sector still pointed to growth, with 52.2. We may get a change in April following the weak manufacturing PMI.
2. Monetary Policy Meeting Minutes: Tuesday, 23:50. The meeting minutes are not from the latest meeting, but they still provide insight and perhaps hints to the next moves. Is the current stimulus sufficient?
3. Coincident Index: Friday, 5:00. This figure has been on the rise for quite some time, but ticked lower last month to 114.9 points. The preliminary number for March is likely to show stability now.
4. Leading Indicators: Friday, 5:00. This composite indicator, based on 11 separate ones, disappointed by falling sharply to 108.5%, erasing steady gains seen beforehand. In March, a small recovery is likely.

* All times are GMT

USD/JPY Technical Analysis

Dollar/yen started the week in the usual 102-102.74 range mentioned last week. An attempt to break higher late in the week did not fully materialize.

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.

104.10, the high of April 2014 is currently a minor line, but should be watched. 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. 102.00 is a round number that supported the pair several times and is the botom of the range.

101.20 provided strong support for the pair during March 2014 and is the low line of support. 100.75 prevented the pair from falling lower during February and is the last backstop before the round number of 100.

100 is not just a round number but also worked as resistance several times in the past.

Moderate uptrend support

We can observe a moderate uptrend support line (thick black line) accompanying the pair since early March.

I remain bullish on USD/JPY

While the BOJ is not keen on more stimulus, the strength in the US as demonstrated this weekcertainly supports the pair. There is room for more steady gains.