What’s Happening?

Since the beginning of this year, JPY has been steadily clawing back late 2016 losses. Yen pairs have the potential to be active this week on a combination of technical tests, international developments impacting its role as a haven for capital and domestic economic developments.

Technicals:

Since completing a double top near 118.60 at the beginning of January, USDJPY has been trending back downward. Steady declines in the pair and the RSI with the latter holding below 50 of late indicate distribution.

More recently, lower highs above 111.60 support have been forming a bearish descending triangle. Resistance has dropped from 114.05 toward 112.90 and then 112.35 with the pair trading near 112.25.

A break under 111.60 would complete the triangle and signal the start of a new downleg with initial support tests possible near 111.25 then the 110.00 round number and a Fibonacci cluster near 109.00.

Fundamentals

This week JPY could find itself at the centre of a number of major developments.

Domestically, a flurry of major economic announcements could have an influence on the Bank of Japan and its QQE program going forward, including (dates North American time)

Monday night – Industrial production, retail sales, housing starts, construction orders

Tuesday night – manufacturing PMI, vehicle sales

Thursday night – inflation, unemployment, service PMI

Internationally, JPY could be impacted by swings through the week in USD, GBP, EUR and other currencies based on political developments and speculation on when and how many times the Fed may raise interest rates this year. Key US events include:

Tuesday night – President Trump address to a joint session of Congress

Friday – Speeches by FOMC Chair Yellen and Vice-Chair Fischer 

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