Yen continues to weaken

The USD edged lower on Friday against its counterparts but not against the Yen with USD/JPY reaching a one-year high. BoJ’s dovish stance in combination with carry trade set JPY as an easy target to short. It should be noted that the contraction of Japan’s PPI rates for October tended to highlight the deflationary tendencies in the Japanese economy earlier this morning and may have added some downward pressure on JPY. Yet JPY sellers seem to be willing to risk the possibility of market intervention by Japan, given multiple warnings issued by the Japanese Finance Ministry in the past weeks.

USD/JPY edged higher breaking the 151.70 (S1) resistance line, now turned to support. We tend to maintain a bullish outlook for the pair given that the upward trendline guiding it since the 3^rd of October remains intact and the RSI indicator is above the reading of 70 implying a strong bullish sentiment in the market. Yet exactly the fact that the RSI indicator is above 70 may be a warning to market participants that the pair has reached overbought levels and may be ripe for a correction lower. Similar signals seem to be sent by the Bollinger bands as the price action is flirting with the upper boundary. Should the pair continue to find extensive buying orders along its path, we set the 153.35 (R1) line as the next possible target for the bulls. Should the bears take over we may see the pair breaking the 151.70 (S1) support line and aim, the prementioned upward trendline, in a first signal that the upward movement has been interrupted and aim for the 151.10 (S1) level.       

US stock markets tended to gain on Friday in an effort to recover from Powell’s hawkish comments. We may see a shift in the market’s attention as we get the earnings reports of a number of retail companies. We note we get the earnings report of Home Depot (#HD), JD.Com (#JD) and Ali Baba (#BABA) and Walmart (#WMT). The releases are to show the health of the companies mentioned but also may provide a wider picture of the demand side of the US economy.

US 500 rose on Friday and managed to break the 4400 (S1) resistance line, now turned to support. We maintain a bullish outlook for the index, given that the upward trendline guiding it remains intact. Should the bulls maintain control for the index we set as the next possible target for US 500, the 4465 (R1) resistance line. Should the bears take over, we may see the index breaking the 4400 (S1) support line, the prementioned upward trendline and aim for the 4310 (S2) support nest. 

Other highlights for the day:

Today we note the release of Turkey’s current account balance for September and Germany’s current account balance for September while on the monetary front, ECB Vice President De Guindos and BoE’s MPC member Mann are scheduled to speak. During tomorrow’s Asian session, we get Australia’s consumer sentiment for November and October’s Business conditions and outlook indicators.

As for the rest of the week:

On Tuesday, we get UK’s employment data for September, Sweden’s CPI rates for October, the Eurozone’s revised GDP rate for Q3, Germany’s ZEW indicators for November and we highlight the US CPI rates for October. On Wednesday we make a start with Japan’s revised GDP rate for Q3, China’s industrial output rate for October, the UK’s CPI rates for the same month, Eurozone’s industrial output for September, the US PPI rates and retail sales, both for October and Canada’s September manufacturing sales for October. On Thursday we note the release of Japan’s trade data and Australia’s employment data, both for October, the weekly US initial jobless claims figure, the US November Philly Fed Index and October’s industrial production. On Friday we get UK’s retail sales, Eurozone’s final HICP rates and Canada’s producer prices, all being for October.  

USD/JPY 4 Hour Chart

Support: 151.70 (S1), 150.10 (S2), 148.00 (S3)

Resistance: 153.35 (R1), 154.70 (R2), 156.65 (R3)

US 500 Daily Chart

Support: 4400 (S1), 4310 (S2), 4240 (S3)

Resistance: 4465 (R1), 4540 (R2), 4610 (R3)

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