During last week's trading, the price of the US dollar against the Japanese yen (USD/JPY) was closest to testing the psychological resistance of 150.00. Its gains extended to the resistance level of 149.70, and from there it was exposed to profit-taking selling operations. This was amid fears from the markets of Japanese intervention in the markets to prevent further collapse of the Japanese yen, then the pair declined. Currencies headed towards the level of 148.52 before quickly rebounding upward with gains to the level of 149.50 before closing trading around the level of 149.30 in light of the continued control of the strongest bulls over the performance.
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As I mentioned before, the discrepancy between the future of the US Federal Reserve’s hawkish policy and the Bank of Japan, which has negative interest rates alone among global central banks, will remain an important factor for the continuation of the upward trend of the dollar pair against the Japanese yen.
This week's economic data includes a pair of high-level reports on the state of US employment. The August JOLTS report on Tuesday and the September US Nonfarm Payrolls report on Friday are expected to show a significantly more resilient labor market. The job-to-unemployed ratio — a key measure of labor market tightness for the Fed — may fall to 1.4, according to Bloomberg Economics. US employment likely fell sharply last month after a temporary summer surge in the leisure and hospitality sector.
Emphasis will also be placed on private sector figures.
Before that, the US manufacturing index issued by the Institute for Supply Management on Monday is expected to show a contraction for the eleventh month in a row. The ISM index of services activity, due on Wednesday, is expected to show slightly slower growth. Also on Wednesday, data from the ADP Research Institute is expected to show moderate growth in US private sector employment. Tankan data released by the Bank of Japan on Monday will signal the latest state of business confidence, while Japanese wages data at the end of the week could have implications for monetary policy depending on how much wage growth continues to lag behind inflation, a major point of concern for the Bank of Japan.
Technical analysis of the USD/JPY pair:
- Last Friday's rebound pushed USD/JPY above the 100 hour moving average line.
- As a result, the pair appears to be moving near overbought levels of the RSI on the 14-hour frame.
- In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY currency pair is trading within an ascending channel.
- It also appears that the MACD on the hourly chart has completed a bullish crossover, indicating an uptrend.
- Therefore, the bulls will look to ride the current rally towards 149.73 or higher to the 1.50.10 resistance.
- On the other hand, the bears will look to pounce on pullbacks at around 149.10 or lower at the 148.75 support.
In the long term, and according to the performance on the daily chart, it also appears that the USD/JPY currency pair is trading within an upward channel. However, the daily MACD appears to be struggling for momentum, indicating a potential pullback. Therefore, the bears will target potential pullback profits at around 148.32 or lower at the 147.00 support. On the other hand, the bulls will target long-term profits at around 150.55 or higher at the 151.75 resistance.
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