Currency Analyst since 2010

USD/JPY: forecast for May 30 - June 5

USD/JPY was consolidating during the past week. The pair was capped by the 55-day MA and the daily Ichimoku Cloud.

The risk of Japanese monetary intervention at the current levels is low, and the yen was supported by concerns about China’s economic slowdown. Next week there will be a number of news from China: official and non-official manufacturing PMIs will come on Wednesday and Caixin services PMI is due on Friday.

In addition, looking ahead, it will be important what Japanese Prime Minister Shinzo Abe decides to do with the sales tax, which is scheduled to be increased in April 2017. The increase would likely hurt the nation’s economy and a delay of this step could support Tokyo's stock market, which traditionally weakens the yen. According to Japanese media, Abe will hold a press conference on this issue on Thursday, June 2. Weak Japanese inflation data – in April and May consumer prices continued falling – is another factor, which should limit the yen’s strength, though its impact won’t be strong.

The ability of USD/JPY to resume recovery will largely depend on the expectations of the US Federal Reserve’s interest rate policy. Here we are interested in comments of the Fed’s head Janet Yellen and US economic data, especially ISM manufacturing PMI on Wednesday and nonfarm payrolls on Friday. Higher odds of the Fed’s rate hike this summer will help USD/JPY get higher.

Resistance lies at 112.80 and 114.00. Support is at 108.70 and 107.50. 

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