US GREENBACK VERSUS THE JAPANESE YEN TUSSLE

FUNDAMENTAL BEAM

USD/JPY finished the week strongly, as the pair gained slightly over one cent on the week. USD/JPY closed the week at 98.20. This week’s highlights are the Tankan indexes and the BOJ Monetary Policy Statement. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.

Japanese inflation indicators met their estimates last week. In the US, Unemployment Claims were down slightly, but key manufacturing and housing data posted declines.

Updates:

• USD/JPY falls on US government shutdown fears: The yen is certainly enjoying its safe haven status. As negotiations in the US concerning a government shutdown got stuck...
• The Sword of Damocles may fall on the US unless a deal on a budget is reached today: Idea of the Day This could be a tricky end of the month. On top of the usual month end...
• Investor confidence shaken by political tensions on both sides of the Atlantic and a default threat in the US: A number of political developments over the weekend have shaken investor confidence worldwide, sending global equities sliding as we head...

USD/JPY daily chart with support and resistance lines on it.

1. Manufacturing PMI: Sunday, 23:15. Manufacturing PMI has been above the 50-point level since January, pointing to expansion in the manufacturing sector. The index came in at 52.2 points in July, and the markets are hoping for another strong showing in August.
2. Preliminary Industrial Production:Sunday, 23:50. This indicator looks at total industrial output and provides an important gauge of the health of the manufacturing industry. The indicator bounced back from a sharp decline in June, posting a strong gain of 3.2% in July. However, this was well short of the estimate of 3.9%. The markets are bracing for a weak reading for August, with an estimate of -0.2%.
3. Retail Sales: Sunday, 23:50. This important consumer spending indicator looked weak in the previous release, posting a decline of -0.3%. This missed the estimate of 0.0%. The markets are expecting a turnaround in the August reading, with an estimate of a healthy gain of 1.1%. Will the indicator follow suit and meet or beat this prediction?
4. Housing Starts: Monday, 5:00. Housing Starts continues to point to double-digit growth. The indicator posted a gain of 12.0% in July, but this was lower than the previous month and well below the estimate of 14.5%. The estimate for the August reading stands at 12.9%.
5. Household Spending: Monday, 23:30. Household spending is an important component of consumer spending, which is critical for economic growth. This indicator has not looked strong in recent readings, and posted a weak gain of 0.1% in July. The August estimate calls for more of the same, with a forecast of a 0.2% gain.
6. Tankan Manufacturing Index: Monday, 23:50. The well-respected Tankan indexes are eagerly anticipated and can have a major impact on the movement of USD/JPY. The Manufacturing Index, released quarterly, rose to 4 points in Q2. This was the first reading above the zero level, which indicates improving conditions, in almost two years. The markets are expecting better news in Q3, with an estimate of  7 points.
7. Tankan Non-Manufacturing Index: Monday, 23:50. This quarterly index shot up from 6 points to 8 points in Q2, its best showing since 2008. The upward trend is expected to continue, with an estimate for Q3 at 14 points.
8. Average Cash Earnings: Tuesday, 1:30. Average Cash Earnings is an important gauge of consumer spending, since an increase in disposable income is likely to translate into more spending. The indicator improved to 0.4% last month, but this was well short of the estimate of 0.8%. The markets are bracing for a decline in the August reading, with an estimate of -0.2%.
9. 10-year Bond Auction: Tuesday, 3:45. Average yields on Japanese bonds have been fairly steady, with the previous auction posting an average yield of 0.77%. No significant change is anticipated in the upcoming auction.
10. Monetary Base: Tuesday, 23:50. Monetary Base continues to increase, in keeping with the BOJ’s monetary economic platform. In July, the indicator rose to 42.0%, and the estimate for the August release stands at 45.3%.
11. BOJ Monetary Policy Statement: Friday, Tentative. One of this week’s highlights, the Policy Statement details the interest rate decision taken at the previous policy statement and factors that led up to the decision. The Statement will be carefully scrutinized by analysts for any clues regarding future interest rate moves.  This will be followed by a BOJ press conference.

TECHNICAL BEAM

Significantly impressive move by both currency have daunted the expertise of technical analyst as well as challenged their price forecast. Bearish gap opening of the pair following Asian open has not dealt any harm on the Greenback as expected. Hence, we expect the market price, having been unable to complete a third wave leg at 96.325 as a result of a reduced strength from the gap effect.

A view of how market should have behave  if gap had no played

As a result of this gap effect therefore, we expect the price of this currency pair to take a form as shown in the chart below.

I AM BULLISH ON USDJPY

Price is expected to make an impulsive move up to 104.04 followed by a corrective wave B down to 99.101 and then a complete wave C or 3 to the cliff of 103.04.

NOTE: Price predictions produced by FibonacciPrice&PatternTrader may be affected by unforseen events like hurricane, earth quake, flood and other natural disasters consequently changing price patterns already predicted. Hence we advice strict adherence to money management techniques.

HAPPY TRADING