USD/JPY: Weekly Technical Analysis For May 18-22, 2015

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Fundamental Analysis:

The dollar continued its weakness in last week’s trading session against a basket of other major currencies, after a string of disappointing U.S. economic reports fueled fresh concerns over the strength of the recovery.

Official data showed that U.S. retail sales including automobiles were flat last month, confounding expectations for a 0.2% rise. March’s figure was revised to a 1.1% increase from a previously estimated 0.9% gain.

Core retail sales, which exclude automobiles, increased by 0.1% in April, disappointing expectations for a 0.5% gain. The change in core retail sales for March was revised to a 0.7% increase from a previously estimated 0.4% uptick.

The University of Michigan said in a preliminary report that its consumer sentiment index fell to a seven-month low of 88.6 this month from 95.9 in April. Analysts had expected the index to decline to 96.0 in May.

The UoM also said its inflation expectations for the next 12 months ticked up to 2.9% this month from 2.6% in April.


Technical Analysis:

USD/JPY continued to trade in a range bound market of 118.48/120.50 last week and outlook remains unchanged. Initial bias stays neutral this week first. Overall, the pair is seen as bounded in consolidation pattern from 121.84. Below 118.48 will extend the decline from 122.01. In that case, we’d expect strong support from 115.55 cluster support (38.2% retracement of 105.19 to 121.84 at 115.47) to contain downside and bring rebound. Meanwhile, above 120.83 will turn focus back to 122.01 resistance.


In the week ahead investors will be turning their attention to Wednesday’s Federal Reserve minutes for clues on the possible timing of a rate increase. Friday’s data on U.S. inflation will also be closely watched.

Also on Friday, the Bank of Japan is to announce its monetary policy decision and hold a press conference following the announcement. Earlier in the week data from GDP is going to be closely watched.

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