• Narrow range trading with USD/JPY lower on the week.
  • Improving US statistics and rising Covid cases, leave pair without firm direction.
  • Neither 108.00 resistance of 106.50 support have been challenged.

Late summer doldrums have hit the currency markets early this year abetted by the indecision over Covid and the improving US economy.

The risk trade, on or off, was unable to gain a foothold in the week’s action. 

Risk-on, in this case leading to a lower dollar was supported by the better than forecast US service sector purchasing managers’ indexes and last week’s manufacturing PMI. Countering that for the risk-off side were the rising Covid cases in many states and unemployment claims which are still running at well over a million new filing every week.

Japanese economic statistics gave some indication of improvement in June. Overall household spending fell 16.2% in May, following the 11.1% drop in April, for the eighth decline in a row.  Machinery orders fell 16.2% on the year in May after a 17. 7% decrease in April but monthly orders rose unexpectedly 1.7% after falling 12% in April.

The Eco Watchers Survey for June which follows regional trends was much better than forecast with the outlook score coming in at 44 on a 24.1 estimate and May’s 36.5 and the current reading at 38.8 on a 21.1 prediction and a 15.5 result in May.

USD/JPY outlook

As the week closed USD/JPY dropped to its lowest level in over two weeks. The continuing increase in diagnosed Covid cases in the US and many other countries around the world has not sent markets back to the risk-off safety of the dollar.  

Credit markets have responded to the rising cases with the lowest Treasury rates since the lockdowns began easing more than a month ago as investors seek the safety of US debt.  The yield on the 10-year Treasury reached 0.60% its lowest since April 24.  The yield on the 30-year hit 1.28% is lowest since May 1. The spread between the two was 0.68%, its smallest since May 15 and indication that markets expect interest rates to remain low for a lengthening period.

Several states with rising Covid cases have paused or rolled back their opening plans and while the larger caseload is partially due to more testing and fatalities have only increased marginally in a few cities, hospitalizations are up and the crucial factor is time.  The latency period for Covid complications and death is three to five weeks and that time is just starting.

If business closures become widespread and mandatory then markets will likely reassess the current risk-on status of the dollar.

Japanese statistics July 6-July 10


Overall annual household spending at -16.2% in May was worse than the -12.2% estimate and April’s 11.1% decline. Labor cash earnings fell 2.1% over 12 months in May almost double the 1.1% prediction and three times the 0.7% drop in April.


The Coincident Index for May which summarizes the economy in one statistic dropped to 74.6 in May from 80.1 in April. It had been expected to rise to 80.7.

The Leading Economic Index rose to 79.3 in May ahead of the 73.2 forecast and April’s 77.7. It was the first rise since February.


The regional Eco Watchers Outlook Survey climbed to 44 in June from 36.5in April far surpassing the 24.1 forecast and bringing it between December’s 45.5 and January’s 41.8.  The Current Survey registered 38.3 from Aprils 15.5 also besting the 21.1 estimate.

Machinery orders rose 1.7% on the month on a fo-5.4% forecast and April 12% decrease. On the year they were down 16.3% in May and 17.7% in April.


US statistics July 6-July 10


The service sector purchasing managers’ index from the Institute for Supply Management unexpectedly jumped to 57.1 In June from 45.4 in May well beyond the 50.1 forecast.  The new orders index rose a record 19.7 points to 6.16 from 41.9 leaving the forecast of 44 far behind. The prices paid index reached 62.4 from 55.6 in April. Only the employment index at 43.1 failed to reach expansion from 31.8 in May though it did surpass the 30.7 projection.


Consumer credit contracted by $18.28 billion in May following April’s record $70.19 drop.


Initial jobless claims dropped to 1.314 million in the July 3 week from 1.413 prior. Continuing claims fell to 18.062 million from 18.76 million.


Japan statistics July 13-July 17


US statistics July 13-July 17


USD/JPY technical outlook

The relative strength index has dipped into negative with the Friday drop below 107.00 but it is a weak indicator until the USD/JPY penetrates 106.50.  All the moving averages have been crossed with this week's decline with the 21-day (107.23) now enhancing the resistance line at 107.25., the 100-day (107.69) behind 107.60 and the 200-day (108.39) fronting 108.50. 

Resistance: 107.25; 107.60; 108.00; 108.50; 109.25

Support: 106.50; 106.00; 105.40; 105.00; 104.50

USD/JPY sentiment poll

The week's decline has switched the near view to bearish by an almost 3 to 1 preponderance. The forecast at 106.32 with a bullish outlook in the one month and a higher forecast argues that the expected break of 106.50 will not be conclusive. The one quarter view at neutral is understandable as the main determinant, the progress of Covid, is still unknown. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

AUD/USD weaker ahead of RBA’s monetary policy decision

The Aussie is weak, despite receding dollar’s demand and the robust performance of US indexes. Coronavirus developments hit the commodity-linked currency ahead of the RBA.


Gold: This just might be as good as it gets for gold

The price of gold is trading at $1,975 within a range of between $1,960.54 and $1,986.76 at the time of writing, virtually flat on the day in consolidation having eeked out a fresh all-time high.

Gold News

USD/JPY struggling to retain the 106.00 level

The USD/JPY pair traded as high as 106.46 on Monday but struggles to retain gains above the 106.00 level amid lack of dollar’s demand.


Ethereum on its way to regaining $400 while BNB hit a new high at $22.5

BTC/USD is more stable than other coins right now but has been able to recover from its crash towards $10,500. It is currently trading at $11,369 and faces very little resistance until $14,000.

Read more

WTI drops below $40 on demand worries, OPEC+ output increase

Crude oil prices posted losses last week and seem to be struggling to shake off the bearish pressure on Monday. As of writing, the barrel of West Texas Intermediate (WTI) was trading at $39.85, losing 1.5% on a daily basis.

Oil News

Forex Majors