USD/JPY Weekly Technical Forecast (Sep 20-24 2010)

USD/JPY saw a very exciting week with the intervention finally happening and sweeping the markets. The upcoming week is light in terms of events, so the technicals will play a bigger role. Here’s an outlook for Japanese events and an updated technical analysis for USD/JPY.

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



Note that Monday and Thursday are official holidays in Japan. The yen will still move. Let’s start:

1. All Industries Activity: Wednesday, 3:30. This indicator shows the change in purchases made by businesses. A subset of this data was already reflected a week earlier. Nevertheless, as the only indicator this week, it will probably move the yen. A rise of 1.1% is expected now.

USD/JPY Technical Analysis

Dollar/yen began the week following the downtrend channel, going below the 83.34 level (mentioned in last week’s outlook) and reaching a new 15 year low of 82.87. And then the BOJ came in – the massive intervention sent USD/JPY 300 pips higher, breaking the downtrend channel and quite a few resistance lines. It remained in a narrow range until the end of the week, closing at 85.79.

USD/JPY is now in a narrow range that characterized its trading after the intervention – 85.60, which the BOJ may be guarding and the small double top of 85.90.

Looking up, the next line of resistance is 86.34, which provide support twice in July and worked as resistance in August. The next line is close – 86.90, which was a support line in June.

Above, 88.10 was a peak in July, before the strong fall and now served as resistance. Higher, 89.15 was a double top almost three months ago, and it’s followed by 89.76, that provided support a long time ago.

Looking down below the guarded 85.60 line, the next line of support is at 84.80, which provided support in August. This is followed by the 83.34 line and the new 15 year low at 82.87.

I remain bullish on USD/JPY.

The intervention was massive and I believe that the BOJ will continue working hard to keep the currency weak, also during the Japanese holidays and might send the pair out of the narrow range – to the upside.

USD/JPY Weekly Technical Forecast (SEP 13-17 2010)

The internal elections in Japan’s ruling party are the main theme this week, among other events. Here’s an outlook for the Japanese events and an updated technical analysis for the falling USD/JPY.

USD/JPY daily chart with support and resistance lines marked. Click to enlarge:



There has been a lot of talk about an intervention to weaken the yen. Only a coordinated intervention can have a long term effect. Will it happen this week? Or will the talk continue? Let’s start:

1. Revised Industrial Production: Published Tuesday, 4:30. Japanese industrial output showed a modest rise of 0.3% according to the initial release. This came after a drop of 1.1% drop in the previous month. The rise will probably be confirmed now.


2. Leadership elections: Tuesday. The Japanese prime minister, Naoto Kan, has been in office only for a few months, and is now challenged by Ichiro Ozawa,  a veteran politician. Mr. Ozawa raised the issue of the strong yen many times during his election campaign and put it high on the agenda. A victory by Ozawa means yet another prime minister for Japan, the third this year. Political uncertainty and the vow to fight the strong yen may hurt the yen. A victory by current PM Kan will boost the yen.


3. Tertiary Industry Activity: Published Wednesday, 23:50. This services sector indicator is a good gauge for the Japaneses economy. The past two months shows a decline of 0.9% and 0.1%. A rise of 0.7% is expected this time.


4. Masaaki Shirakawa talks: Begins speaking on Thursday, 6:00. The governor of the BOJ will speak at a conference in Tokyo and is likely to mention the high level of the yen. If he reiterates the words from previous appearances, the market will dismiss it. Only firmer talk can move the currency.

All times are GMT.

USD/JPY Technical Analysis

USD/JPY began the week by dropping lower, setting a fresh 15-year low at 83.34. It didn’t stay there too long and gradually climbed higher, to close at 84.16.

84.80, which was a support line in August and also a swing low in November, now serves a strong resistance line. Above this line, the next line that will cap the dollar in case of surge is the 86.30 line which was a support line twice in July.

Higher, 88 was a cushioned the pair in October, March and May. Higher, there are two lines close to each other – 89.15 was a resistance line in July and a support line in May, and 89.75, a weaker line, which provided support in March.

Downtrend channel – the recent descent of USD/JPY is characterized in an imperfect downtrend channel – the downtrend resistance was formed from the 89.15 line and continued with two perfect touches. The downtrend support that was formed earlier (in June) served as perfect support three times since then, but was also violated briefly once.

I am bullish on USD/JPY.

The talks about intervention are mounting – while they have proved fruitless up to now, there’s a chance of an intervention due to the depth this pair reached, and the internal political tensions that the currency is causing in Japan. Only a globally coordinated intervention will have a big long term impact.