USDJPY Throws Back Gains

As mentioned last week, the 103 resistance level has become a psychological ceiling for this pair in recent months. Despite the previous weeks positive news, such as US Initial Jobless Claims dropping to an 8-year low, the United States economy adding over 200,000 jobs to its economy for the sixth successive month (something not achieved for around 15 years) alongside the US 2Q GDP estimate surpassing expectations, this pair failed to close above 103. This resulted in the pair pulling back substantially last week.

Economic news headlines from both economies were light. The only major notable releases consisted of US Initial Jobless Claims falling to an impressive 289,000, as well as the Bank of Japan (BoJ) monetary statement expressing that the Japanese economy is recovering moderately. Although, the BoJ did appear to concede that the after effects of an April sales tax increase is negatively impacting recent expenditure releases, alongside displaying a bleaker view on exports. In the mid-term, this provides a future possible opportunity to exploit potential JPY weakness.

Next week sees a far greater quantity of economic data announced for this pair. United States economic releases include; Small Business Optimism and Monthly Budget Statement (Tuesday), Advance Retail Sales alongside Business Inventories (Wednesday) and University of Michigan Confidence (Friday). Japanese economic announcements consist around Consumer Confidence (Monday), Industrial Production (Tuesday) and 2Q Gross Domestic Product on Wednesday. Reuters are reporting that the GDP release is expected to show the biggest contraction in economic activity since the global financial emerged. If confirmed, there is high potential for the USDJPY to recover all losses from the prior week.

The technicals on the Daily timeframe showcase that the bullish trendline that emerged in the previous week, turned out to be just a short-term bull. Other than that, there are no other technical patterns evident at present. Support can be found at 101.525 and 101.230.

If this pair moves to the upside, resistance is located at 102.270, 102.540, 102.798 and 103.093. The latter remains a psychological ceiling for the pair and a clean finish above 103 is required to confirm the USDJPY is set for a bull run.