USD/JPY Weekly Outlook - January 5, 2015 to January 9, 2015
USD/JPY remained in a sideways mode with a high of 120.82 and low of 118.86. The weekly closing was at 120.49.
Fundamental Facts for USD/JPY
There have been few economic releases from the U.S. and none at all from Japan due to holidays.
The consumer confidence in the U.S. further improved from 91.00 to 92.6 and the pending home sales which grew to 4.1% from previous month's 2.1%. However the month over month construction spending witnessed a decline from 1.2% to -0.3% during the same month. The initial jobless claims from U.S. came out weak with 298K against the previous 281K. Markit manufacturing PMI from the U.S., for December, also came out weaker at 53.9 as compared to previous month's 54.8. ISM manufacturing PMI also witnessed a decline from 58.7 to 55.5 in December.
The economic releases during the last to last week from Japan had seen the year over year consumer price index saw a drop from 2.9% to 2.4% in Japan in November. The housing starts data had also come 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.
USD/JPY Technical Trends
We had mentioned during the previous outlook update that a support would be expected the range of 119.20 to 119.31 and if that breaks then further consolidation would be expected towards the support of 55-day EMA which was at that time at 117.34. USD/JPY had broken the support of 119.20 but that had proved to be just a market noise as the price did not sustain below 119.20 even for an hour. This fact and another break over 120.00 indicate that the bullish sentiments are intact. However we remain neutral as long as the price -action is below 121.85.
The current outlook remains same as what we had mentioned during last week. The price has been finding support near the upper edge of the daily Ichimoku cloud and the recent bullish crossover of daily Ichimoku cloud's Tenkan-line over the Kijun-line was a strong bullish signal as the crossover took place over the cloud. On the weekly chart the price action has been finding support at the first level support of Tenkan line and that also indicate the underlying strong bullish trend.
On the downside, now, a support is expected to hold at or above 118.86. If this support holds and a break over 120.82 takes place then a retest of 121.85 will be expected. As mentioned during the last update, though the journey towards 125.00 is not expected to be smooth but if a break over the recent 121.85 takes place then further upward moves towards the next resistance zone of 123.80 to 124.20 will be expected. This resistance zone should bring a very strong psychological resistance because of approaching 125.00. However we will remain cautious for the upside as long as 121.85 resistance holds.
In case 121.85 resistance holds and the price-action does not find support at or above 118.86 then 121.85 should act as a temporary top and such a case should extend the downward correction towards first towards 118.00 and if there is a decisive break below 118.00 then the decline should extend towards 116.85. These supports are derived from the trend of 55-day EMA support as well as the price-action on December 16th and 17th. If this 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