USD/JPY: outlook for September 4-8

USD/JPY: outlook for September 4-8

2019-11-11 • Updated

Japanese yen has been influenced by tensions between the US and North Korea. It gained as a safe haven at the beginning of the week after North Korea fired a missile over Japanese territory on Tuesday. USD/JPY fell to 108.25 before recovering to the 110.50 area.

According to Japan’s defense minister, more missiles will come. North Korea watchers suspect the regime may conduct another nuclear test over the next 10 days. Although market reactions to North Korea’s actions have become more muted, if the Asian nation continues to escalate the situation, the yen will strengthen more versus the US dollar.

Japanese preliminary industrial production declined by 0.8%, housing starts fell by 2.3%, household spending reduced by 0.2%. In the coming days, Japan will release average cash earnings, leading indicators, final GDP for the second quarter and current account. US economic calendar will be lighter than in the previous week. The greenback may take a break, although American economic fundamentals aren’t encouraging.

USD/JPY managed to close in August above 50-month MA at 109.70. The pair is supported at 108.10 (April low). A decline below this level will set the stage for a big swing down. The fact that the US dollar managed to rise despite the disappointing labor market data on Friday suggests the possibility of some near-term recovery, although there are many resistance levels ahead at 111.00, 111.40 (200-week MA) and 112.40 (200-day MA).

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