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Currency Analyst since 2010

USD/JPY: forecast for June 1-7

Elizaveta Belugina

USD/JPY made a thrust to the upside peaking at 124.47, the highest level since 2002. The advance was caused by the market’s positive sentiment about the US dollar.

The expectations of a good NFP release next week may keep the greenback in demand. The next important level lies at 125.00, 125.75 and 126.20. The risk to this bullish scenario comes from comments of Japanese policymakers who may decide to halt the yen’s decline as a too weak national currency hurts importers and consumers.

Japanese economic data released during the past week was mixed: although inflation and industrial production surpassed analysts’ expectations, inflation sharply decelerated in April compared with the previous month (from 2.2% to 0.3%). Moreover, consumer spending remained extremely weak: the indicator fell by 1.3% from the previous year. The decline was surprising because in April 2014 spending in was already very low.

Finance Minister Taro Aso said that the current yen weakening in the past few days has been rough and pledged to monitor the situation. However, Japanese Economics Minister Akira Amari said on Friday the pace of yen declines could not necessarily be described as excessive.

On Monday watch Japanese capital spending data, and on Tuesday the nation will release average cash earnings figures. US NFP will be the most important event of the week. Support lies at 122.00, 121.50 and 120.80. As long as USD/JPY stays above 119.30, the outlook will remain bullish.

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