The USD/JPY is set to break 111.00 – will positive US PMI’s add further bullish momentum?

By Admiral Markets

Source: Economic Events February 21, 2020 – Admiral Markets’ Forex Calendar

It seems as if the USD/JPY took its time to react to Japan’s latest economic developments last Monday.

The data showed that Japan’s GDP shrank an annualized 6.3% in Q4 of 2019, following a downwardly revised 0.5% growth from the previous period, performing much worse than the pessimistic market forecasts of a 3.7% fall.

It was the sharpest contraction since the second quarter of 2014, and second-biggest drop since the Great Financial Crisis. This was led by falls in consumer and business spending on the back of a sales tax hike, a destructive typhoon, and subdued global demand. And yet, this does not include the potential negative effects of a shrinking global economy driven by developments around the Coronavirus, so the JPY was sold off sharply, pushing the USD/JPY to new yearly highs and the highest levels since May 2019.

If today’s economic data around several US PMI’s come in better than expected and result, at least in the short-term, in a push higher in 10-year US-yields, the push above 111.00 over from the last few days would certainly become sustainable. It would bring 112.00/30 into our focus for the weekly close, make further gains in the currency pair up to 114.00/30 in the coming days a possibility.

Technically the mode on a daily time-frame can now be considered bullish, as long as we trade above 107.80/108.00:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between December 11, 2018, to February 20, 2020). Accessed: February 20, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the USD/JPY increased by 0.5%, in 2016 it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, in 2019, it fell by 0.85%, meaning that after five years, it was down by 9.2%.

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