Forex Market: USD/JPY trading forecast for Monday

Friday’s trade saw USD/JPY within the range of 118.40-119.22. The pair closed at 118.75, losing 0.30% on a daily basis and extending losses from Thursday. The cross fell 0.19% for the whole week, which followed a 1.30% gain in the week ended on February 6th. On Monday (February 16th) USD/JPY may be influenced by a number of fundamentals, as listed below.

Fundamentals

United States

The Presidents Day

Every third Monday in February is referred to as the Presidents Day federal holiday. This day commemorates all the past presidents of the United States and honors the life and deeds of George Washington, the first US President. Banks are to remain closed.

Japan

Gross Domestic Product – preliminary estimate

Japans preliminary annualized GDP estimate probably showed a 3.7% growth during the fourth quarter last year, according to the median forecast by experts. The nations economy contracted at an annualized rate of 1.9% in the third quarter, according to final data released on December 7th, after posting a 7.3% negative growth in Q2. The latter has been the most considerable annual drop since Q4 2008, when Japanese economy shrank at a rate of 15.2%.

On a quarterly basis, the preliminary GDP probably pointed to a 0.9% growth in Q4, according to expectations. In Q3 economy shrank 0.5%, according to the final estimate, down from a preliminary estimate of a 0.4% contraction, as capital expenditure dropped more than previously estimated and public demand was weaker. Private demand declined 0.9%, subtracting 0.7 percentage point from the overall growth. Capital spending was 0.4% lower, down from a 0.2% drop reported in the preliminary reading, subtracting 0.1% from the GDP number. Public demand increased 0.5%, down from a 0.7% gain reported in the preliminary reading, adding 0.1% to the overall growth, according to the report by the Japanese Cabinet Office.

Currency traders usually consider a higher rate of economic growth as a precursor to an interest rate hike. Higher interest rates will usually attract more investors, willing to purchase assets in the country, while, at the same time, this will increase demand for the local currency. Therefore, in case Japanese growth outstripped market expectations, this would have a bullish effect on the yen. The preliminary GDP data is due out at 23:50 GMT on Sunday (February 15th).

Industrial Output – final estimate

The final estimate of the index of industrial production in Japan probably confirmed the preliminary data of a 1.0% expansion in December compared to a month ago, as reported on January 29th. In November output shrank at a monthly pace of 0.5%.

In annual terms, final industrial production probably also confirmed the preliminary estimate, pointing to a 0.3% increase in December. Annualized industrial output contracted at a pace of 3.7% in November, or the most significant annual decline since June 2013, when production fell at a pace of 4.6%.

The index, reflecting the business cycle, measures the change in overall inflation-adjusted value of output in sectors such as manufacturing, mining and utilities. In case industrial output shrank more than anticipated, this would mount selling pressure on the Japanese yen. The Ministry of Economy, Trade and Industry is to publish the official industrial data at 4:30 GMT on Monday.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 118.79. In case USD/JPY manages to breach the first resistance level at 119.18, it will probably continue up to test 119.61. In case the second key resistance is broken, the pair will probably attempt to advance to 120.00.

If USD/JPY manages to breach the first key support at 118.36, it will probably continue to slide and test 117.97. With this second key support broken, the movement to the downside will probably continue to 117.54.

The mid-Pivot levels for Monday are as follows: M1 – 117.76, M2 – 118.17, M3 – 118.58, M4 – 118.99, M5 – 119.40, M6 – 119.81.

In weekly terms, the central pivot point is at 119.19. The three key resistance levels are as follows: R1 – 120.08, R2 – 121.40, R3 – 122.29. The three key support levels are: S1 – 117.87, S2 – 116.98, S3 – 115.66.