Does Japan favor a weaker yen?
The US dollar continued its rampage in the currency markets. The currency reached quarter century highs against the yen and euro on Thursday. In this article, we’ll detail USDJPY Weekly Technical Forecast for July 18th – 22nd.
Consumer inflation in the US jumped to 9.1% in June. Consumer spending was slightly stronger than forecast in June. The difference and more, is likely due to price inflation and not higher spending volumes. The apparent lack of a negative impact from inflation on consumer purchases pulled Treasury yields and the dollar lower on Friday and dropped the futures odds for a 100 basis point increase on July 27 back to under 30%.
Fears of a US and global recession in the second or third quarters kept the safety-trade lively and funds flowing to the US assets and the dollar.
It is highly unusual to find US interest rates moving higher in an uncertain and fragile economy. Interest rates are normally counter cyclical, rising as the economy overheats and falling when growth weakens.
Friday’s US Retail Sales release gave dollar bulls a reason for some mild profit-taking after this week’s 2.1% run to Thursday’s top and the 9.4% climb since May 30.
USD/JPY technical outlook
The June 30 negative cross of the signal line by the MACD (Moving Average Convergence Divergence) price line did not signal a lower trend, as it was easily negated by the powerful fundamental factors favoring the USD/JPY. The positive cross of the signal line on Wednesday was seconded by the Relative Strength Index’s (RSI) touch on overbought status but it does not signal a technical trend higher. Volatility in the Average True Range (ATR) has been declining for three weeks. Wednesday’s blip higher did not restore a larger outlook either. Notwithstanding the supportive cast of these indicators, a continuation of the higher trend in the USD/JPY depends on fundamental, not technical factors.
Resistance: 139.40, 140.00, 140.50, 141.00
Support: 138.00, 137.40, 137.00, 136.55
Moving Averages; 21-day 136.22, 50-day 132.77, 100-day 127.88, 200-day 121.13
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