Currency Analyst since 2010

USD/JPY: future of USD's breakthrough

Elizaveta Belugina

USD/JPY consolidated during the most part of the past week after testing the highest levels since 2002, but then made a breakthrough to the upside on good US labor market figures and reached the 125.85 mark.

Bullish pressure on USD/JPY is building on the signs that the US economy is returning to more solid growth. However, there are fears that Japanese officials will step in to halt the yen’s decline. So far they have given little indication that they are concerned with the recent slide of Japanese currency. Yet, the higher USD/JPY gets, the higher is the risk of verbal interventions from Japan. Also note that there’s a MACD divergence on the weekly chart, and the pair is overbought, so the bulls need to beware of the risk of corrections down. Further resistance is at 126.00/20 and 126.85. Support is at 124.33, 124.00 and 123.70.

On Monday pay attention to the release of Japan’s revised Q1 GDP. Many analysts think that the nation’s economic growth may be reviewed to the upside because of a pickup in capital spending. Japanese current account is expected to show a surplus because of a good trade balance which is helped by lower oil prices and weaker yen. At the same time, figures on Wednesday will likely show Japan’s core machinery orders fell in April, though analysts see them gradually regaining momentum, reflecting positive corporate earnings.

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