Today, on October 22nd, the US Dollar lost a bit of its value against the Japanese Yen after Nikkei 225 showed some strength backed by strong economic data from Japan. However, the US currency is still strong after yesterday’s sales report on the US secondary housing market. These are the strongest figures in 2014.
Meanwhile, the Japanese export has reached the strongest value in 7 months during the latest reporting period, thereby backing the economic recovery in Japan in advance of Prime Minister Abe’s forthcoming decision on another sales tax hike, which is scheduled for 2015 and is expected to be increased up to 10%.
The Japanese export increased by 6,9% year-over-year in September. The figures outperformed analyst expectations at 6,5%. Meanwhile, the country’s import boosted by 6,2%. Thereby shrinking Japan’s external trade balance down to 958,3 billion yens. Higher exports are expected to support the recovering Japanese economy, which is still trying to recover from the strongest slowdown in 5 years after Prime Minister Abe decided to raise the sales tax in April 2014 for the first time since 1997.
So, it appears that today’s figures reassured the Bank of Japan, while supporting the central bankers’ opinion regarding gradual economic recovery along with export growth. By the way, next week, the market of USDJPY is going to face 2 major events – the meetings arranged by the BoJ and the Fed’s FOMC.
As for this week, if there aren’t any unexpected key drivers, the market will be watching the US consumer inflation rate. The report is scheduled for today. Most likely, September’s consumer inflation slowed down due to lower crude oil prices. If the core inflation indicator (excluding energy carriers) drops this time, the market may go volatile.
At the same time, a stronger dollar favors a higher 10-year US bond yield. The demand for US dollars shown by Japanese importers increased more than expected amid a pretty high external trade deficit and an ultra-easy monetary policy in Japan.
USDJPY Prospects As Seen By Masterforex-V Academy
As usual, Masterforex-V academy helps us define the near-term prospects of various currency pairs, including USDJPY. This time we are going to take a look at the H1 chart of USDJPY (shown below).
The chart shows that the short-term bias is bullish, with the buyers dominating the market at this very point. Still, this short-term rally is still a bullish reaction to the longer-term downtrend we previously saw (it is still underway but is suspended by the short-term rally).
The support in the form of the red MF sloping channel and the resistance represented by MA 233 from a narrowing triangle, thereby indicating a fight between the bulls and the bears trying to gain control over the market. Apparently, this fight will be over when the price comes out of the triangle and consolidates outside of it by making a new local high or low depending on the direction of the breakout. This is going to be the sign of the next big move especially if backed by fundamentals.
Still, the rally up to 107, 49 and above is more likely once the price goes above MA 223 and consolidates above 107,11 and backed strong US economic figures. This scenario looks more probable. Alternatively, the price may go down to 106,59 and 106,23 and even below, if the US consumer inflation figures fail to come up to market expectations.
