Currency Analyst since 2010

USD/JPY: forecast for March 14-20

By Elizabeth Belugina

Japan released weak statistics during the past week. Only the GDP decline in Q4 wasn’t as big as initially seen. The sentiment of the biggest Japanese producers dramatically worsened in the first 3 months of 2016.

The meeting of the Bank of Japan will take place on Tuesday. The regulator is expected to keep its policy unchanged, although some analysts think that another cut in interest rates is possible in order to revive the nation’s economy.

The current positions of the European Central Bank and the Bank of Japan are much alike, and traders have serious doubts about the effectiveness of their policy steps. The euro’s advance after the ECB announced new monetary stimulus measures creates risk of the similar reaction in case the Bank of Japan eases policy. When Japanese central bank reduced deposit rate at the end of January, the yen’s decline on the news was only short-lived. As a result, it’s more likely that the Bank of Japan will decide to save the easing measures for hard times in future. Japanese government bond yields tested record lows in the past week, so many experts think that the BOJ may do more easing only in summer.   

Without stimulus from the Bank of Japan, USD/JPY chances for growth are limited. The Federal Reserve’s meeting is another important event of the next week. However, even in case of more hawkish comments by Janet Yellen the outlook will be more negative, as the market’s sentiment will worsen affecting USD/JPY. 

The overall technical outlook for the pair still looks bearish. To change the situation the prices will have to rise above 115.00. Next resistance will be at 116.25 (55-day MA). Another bearish factor is yen’s buying from Japanese exporters ahead of the end of Japanese fiscal year this month. The consolidation range is getting narrower. Support is at 112.50, 111.00 and 110.00.


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