USD/JPY Weekly Outlook - December 28, 2014 to January 2, 2015
USD/JPY broke above the psychological 120.00 once again but remained in narrow sideways mode after touching 120.82. The weekly closing was at 120.38.
The year over year consumer price index saw a drop from 2.9% to 2.4% in Japan in November. The housing starts data also came out bearish with a year over year change of -14.3% against the previous -12.3%. Overall house spending was slightly better than the previous month's -4.0% but remained negative at -2.5%. Year over year retail trade saw a drop from 1.4% to 0.4% in November. The weak economic data from Japan adds negative sentiments while the JPY has already been weakening strongly against the U.S. dollar.
On the other hand though the durable sales report from the U.S. showed a decline by -0.7% during November but the GDP data came bullish for the quarter 3. The GDP showed a growth of 5% against the 4.6% change in the quarter 2. Reuter/Michigan consumer sentiment index showed strengthening consumer sentiments in the U.S. as the data came up as 93.6 against the previous month's 88.8. Keeping in line with the consumer sentiments, the personal spending showed a positive change of 0.6%, up from the previous 0.2%.
The recent correction after touching a high of 121.85 was a natural ahead of a move towards the next psychological level of 125.00. However the support at 115.57 not only indicated the support of the upper edge of the daily Ichimoku cloud as well as the support of 55-day EMA but also indicated that the psychological resistance of 115.00 has now turned into support. This support also came ahead of the 38.2% retracement level of the move from 105.19 to 121.85. The 38.2% retracement of this move is 115.48.
Though the journey towards 125.00 is not expected to be smooth but technically the another break over 120.00 and the fact that this earlier resistance is not acting as support keeps the bullish outlook intact. The bullish crossover daily Ichimoku cloud's Tenkan-line over the Kijun-line can't also be ignored as the crossover took place over the cloud and hence represents a strong bullish signal.
On the downside we, now, expect a support in the range of 119.20 to 119.31. If this support holds then first a retest of the recent 121.85 will be expected. A decisive break over 121.85 should target 123.80 to 124.20 next. A very strong resistance will be expected in this range because of the strong psychological resistance of 125.00 ranges. While saying this, we will be very cautious for the upside till a break over 121.85 does not take place.
In case 121.85 resistance holds a the price does not find support at 119.00 then further consolidation will be expected first towards the support of 55-day EMA which is at 117.34 currently. In case that support fails then a retest of 115.57 cannot be ignored. Any break of this support should extend the consolidation towards the next support zone of the 50% retracement level of 113.52 to November 11th's low of 113.85.
Analyze Yourself - Various views of USD/JPY Price-Action