For three trading sessions in a row, the USD/JPY currency pair has been subjected to profit-taking selling operations that have often been noted for their possibility of occurring at any time. This is especially with the test of the psychological resistance of 150.00, with which talk of Japanese intervention in the markets to prevent further collapse of the Japanese yen increases.
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- This week, the USD/JPY pair tested the 150.16 resistance level, its highest level in a year.
- Immediately, selling operations followed that pushed it towards the 147.30 support level.
- It stabilized around the 149.00 level at the time of writing the analysis, as the general trend for the currency pair is still bullish.
- The discrepancy continues between the US Federal Reserve's strict policy and the Bank of Japan, which still follows an accommodative policy.
On the economic side, the USD/JPY currency pair is trading influenced by the results of economic data, as the change in US employment ADP for September exceeded the expected number of jobs at 153 thousand with a much lower number at 89 thousand. On the other hand, US factory orders for August outperformed the expected change (monthly) by 0.3% with a change of 1.2%, while the S&P Global Services PMI for September exceeded the estimated reading of 50.2 with a reading of 50.1.
The US Services Purchasing Managers' Index (ISM) for September matched the expected reading at 53.6, down from 54.5 in August. The services sector employment index and new orders index for the period also fell to 53.4 and 51.8, respectively, down from 54.7 and 57.5 in the previous month, while the ISM paid services price index remained unchanged at 58.9.
In Japan, the Jibun Bank Services PMI for September beat expectations of 53.3 with a reading of 53.8.
According to trading in the Forex currency market
The sudden rise in the value of the Japanese yen indicates the possibility of the Bank of Japan intervening in the market to defend the currency, which is steadily declining in value against the dollar. Accordingly, the USD/JPY exchange rate suddenly fell by approximately 2.0% in US trading yesterday to 147.312 after earlier reaching a new highest level in a year at 150.16, a level considered a “line in the sand” for the authorities in Japan, which it became increasingly uncomfortable as the value of the Japanese yen depreciated.
As is known, the sudden decline in the exchange rate after it reached the 150 level strongly indicates that the Bank of Japan has intervened with analysts at the Bank of Japan MUFG warning that this level is worth monitoring. “A shift in BOJ policy is also becoming more likely and we expect strong resistance to yen weakness at levels above 150.00,” MUFG said in a note issued this week. Mizuho also warned clients about the possibility of interference around this key mark. The research says: “It is recognized that the continued weakness of the Japanese yen is a source of concern. “While 150 remains a closely watched number, it is not a clear line in the sand.” Weakness in the Japanese yen will be limited as yen bulls will be wary of intervention risks.”
The Japanese authorities defended the Japanese yen in September in their first entry into the market to strengthen the currency since 1998. The weakness of the yen is considered a major problem, as Japanese companies shift their production abroad and the economy relies heavily on imports of goods ranging from fuel to materials. Raw material into machine parts. For his part, Japanese Finance Minister Shunichi Suzuki recently said that the authorities “will not rule out any options” to deal with excessive fluctuations in currency prices, and that they are monitoring currency movements “with a strong sense of urgency.”
Technical analysis of the currency pair:
It seems that the USD/JPY pair is trying to complete the formation of a double bottom reversal pattern after the recent decline. The pair continues to trade several levels below the 100-hour moving average line. However, the USD/JPY is still far from reaching the 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 attempting a double upward reversal after the recent decline. This indicates an attempt by bulls to regain control of the currency pair. Therefore, they will target extended bounces at around 149.17 or higher at 149.30 resistance. On the other hand, the bears will look to pounce on pullbacks at around 148.89 or lower at the 148.55 support.
In the long term, and according to the performance on the daily chart, it appears that the USD/JPY currency pair is trading within an upward channel. This indicates a significant long-term upward bias in market sentiment. Therefore, the bulls will look to ride the current series of gains towards 150.87 or higher to the 152.67 resistance. On the other hand, the bears will target long-term profits at around 147.21 or lower at the 145.42 support
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