Previewing Japan’s Economic Releases & USDJPY Technical Outlook

The first trading day of the week has no significant economic releases. The global markets are therefore expected to trade in a narrow range throughout the day after a long weekend in the US, and ahead of key economic releases this week.

On Tuesday, traders will be looking for many economic releases in Asia, Europe, and the US, which is set to have a notable impact on the markets. In this article, we will review the upcoming data from Japan, analyze what its implications and discuss the outlook of JPY ahead of the data.

Definitions:

1. Household Spending: This index measures the change in the inflation-adjusted value of all expenditures by consumers. It is released monthly, about 30 days after the month ends.
2. Unemployment Rate: Percentage of the total workforce that is unemployed and was actively seeking employment during the previous month.
3. Retail Sales YoY: This indicator measures the change in the total value of sales at the retail level. It is released monthly, about 27 days after the month ends.

Why Do These Figures Matter?

• Household Spending: Consumer spending accounts for a majority of overall economic activity. It’s one of the most important gauges of economic health due to the vast ripple effect that consumer buying creates in the economy.

• Unemployment Rate: Tends to have a muted impact relative to employment data from other countries because the Japanese economy is more reliant on the industrial sector than personal spending.

• Retail Sales: It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity.

Expectations

Indicator	Forecast	Prior
Household Spending	-1.0%	-2.1%
Unemployment Rate	3.0%	3.0%
Retail Sales YoY	-1.5%	-1.7%

The expectations point to mixed data, but most of the data points to some weakness. Household Spending may decline for the 8th consecutive month. YoY Retail Sales is also set to decline for the eighth month in a row, a pattern we have not seen since 2009. Finally, the unemployment rate is expected to remain stable at 3.0% which matches the lowest level since 1995.

What Does This Mean For The Bank of Japan

Declining household spending and retail sales would push more pressure on the Bank of Japan. This would occur regardless of the fact that the Japanese economy does not rely on consumer spending. Yet, falling household spending with retail sales would put more drag on inflation and growth.

Would this increase the pressure on the Bank of Japan to do more? Yes. When? Not before the first quarter of next year.

USDJPY Technical Outlook

By looking at the monthly chart, the pair managed to bounce sharply in November after stabilizing above its 50% from the notable rally between 2012 and 2015. The pair traded between 99.75 and 105.50 for almost 4 months with no clear break above or below those levels.

In the end, the pair managed to spike all the way above 113.0 on a stronger US Dollar, which spiked all the way above 101.0 for the first time since 2002.

In the meantime, the monthly chart looks very positive and promising. However, traders need to be very careful in following the price action because a viral rally might have a viral retracement.

For the time being 115.60 is the immediate resistance on the monthly chart, which should be watched very carefully, as a break above that resistance would clear the way for further gains, probably above 120.0 on the medium term. On the downside view, 113.0 and 112.44 are key supports.

Levels To Watch

Symbol	S3	S2	S1	Pivot	R1	R2	R3
USDJPY	103.51	105.01	107.98	109.48	112.45	113.95	116.92
EURJPY	113.91	114.68	116.08	116.85	118.25	119.02	120.42
AUDJPY	77.47	78.77	80.10	81.40	82.73	84.03	85.36
GBPJPY	131.11	132.56	134.76	136.21	138.41	139.86	142.06
CHFJPY	106.05	106.85	108.35	109.15	110.65	111.45	112.95
CADJPY	76.57	77.69	79.94	81.06	83.31	84.43	86.68
NZDJPY	73.56	74.47	76.16	77.07	78.76	79.67	81.36