USD/JPY Likely Break Below Key Support if Japanese Household Spending Grows

Last Updated on December 8, 2020

USDJPY Weekly Outlook: 7th December 2020

Japan – Household Spending

On Monday, at GMT 11:30 p.m., the Japanese Statistics Bureau will release the year over year Household Spending figure. It measures the inflation-adjusted value of all expenses by Japanese consumers. 

Top trading brokers consider household consumer spending to be a leading indicator of a country’s economic health. This is because the amounts spent by consumers have a ripple effect on the overall economic activity in the country.

Last month, the year over year Japanese Household Spending figure decreased by -10.2%. The forecast this month is that it will likely increase by 2.5%.

United States – Consumer Price Index

On Thursday, at GMT 1:30 p.m., the US Bureau of Labor Statistics will release the month-over-month consumer price index (CPI) figure. It measures the changes in the price of goods and services bought by US consumers in the last month.

The consumer price index is primarily used by the Federal Reserve to measure inflation. Any significant change in the CPI often makes the Forex market extremely volatile. Also, inflation at the retail level has a big influence on the central bank’s future monetary policy. Hence, it is CFD traders consider it to be a leading indicator of the US economy.

Last quarter, the American consumer price index did not change and remained at 0.0%. The forecast for this quarter is set at an increase of 0.1%.

USDJPY Forecast

Chart of USDJPY - 7th December 2020

The USDJPY tested the downtrend line on November 9. 2020. After it failed to break above the downtrend line, it resumed the downtrend. Over the last month, the USD/JPY has fallen by around 200 pips. However, soon it found intermediary support near the 103.65 level and formed a double bottom pattern. Currently, it is testing the resistance near the 104.20 level.

The US Consumer Price Index will likely increase by 0.1%. By contrast, Japanese household spending will likely jump from -10.2% in the previous month to 2.5%. We believe it would set a bearish fundamental outlook for the USDJPY this week. Therefore, if the USD/JPY closes below the support near 103.65, it would likely attract additional bearish momentum in the market.

Hence, CFD traders should look out for trading opportunities below this major support level around 103.65.

Market Analyst / Trading Consultant at Asif Imtiaz
Market Analyst / Trading Consultant . Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes about various tech and financial topics. You can reach him at contact@asifimtiaz.com
Asif Imtiaz

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