USD/JPY: outlook for August 17-23
By Elizabeth Belugina
Japan will release GDP figures early on Monday. According to the expectations, the nation’s economy contracted by almost 2% in Q2. In addition, don’t miss Japanese trade balance data on Wednesday: this release will show how the nation’s economy is doing in Q3. It looks like the exports growth has significantly slowed in July – a bad sign for Japan which creates the risk of a second quarter of contraction in a row.
As China is Japan’s major trading partner, yuan’s devaluation will affect Japan and its trade balance provoking further stress for Japan’s economy. On Thursday there will be the Bank of Japan’s meeting and press conference. The central bank has not made any new steps since it last expanded massive asset purchases in October 2014. According to the recent comments of the regulator, the central bank thinks that this is enough to reach 2% inflation target. However, traders will still expect more from the central bank if economic data continue deteriorating.
USD/JPY once again was not able to show sustainable growth above 125.00. Further resistance is at 125.30 and 125.85 ahead of 126.00. Support is at 123.85, 123.00 and 122.60. We still think that the pair is not ready for a big break to the upside unless of a dovish surprise from the Bank of Japan.