Current trend

After a minor correction, the yen continued to rise, reaching new highs amid “hawkish” statements from the Bank of Japan officials, and the USD/JPY pair is currently trading at 141.64.

Today, Junko Nakagawa, a member of the central bank’s board, said that current interest rates are still quite low, and officials still have room to tighten monetary policy in the future if the economy and inflation develop in line with forecasts. Despite this, most experts polled by Reuters are confident that the borrowing cost will remain at 0.25% at the meeting on September 20 but some of them believe that the indicator will be adjusted again after the publication of the gross domestic product (GDP) report, which showed growth of 0.7% in the second quarter. On the other hand, the easing of parameters in the US will support the yen in any case by reducing the difference in interest rates but if the spread changes too sharply, the currency may come under pressure.

Investors are awaiting the publication of key macroeconomic statistics on Thursday. Forecasts suggest that the August producer price index in the US will slow from 0.3% to 0.0%, the indicator of domestic prices for corporate goods – from 3.0% to 2.8%, and the indicator of large enterprises activity in the manufacturing sector in the third quarter – from –1.0 points to –2.5 points.

The American dollar is in a downward trend around 101.20 in USDX, having fallen in morning trading after the debate between US presidential candidates Donald Trump and Kamala Harris but the situation may change after the publication of inflation data. Analysts predict that the consumer price index will grow by 0.2% by the end of August, provoking a correction of the indicator from 2.9% to 2.5% YoY, while the core value is likely to be consolidated around 0.2% and 3.2%, respectively. Even a minimal decrease will allow US Fed officials to reduce the cost of borrowing by 50 basis points at once but such a probability is currently estimated by the Chicago Mercantile Exchange (CME Group) FedWatch Instrument at no more than 30.0%, while at the end of last week it reached 50.0%.

Support and resistance

On the daily chart, the trading instrument is correcting within the framework of the development of the Triangle pattern with the beginning of implementation at 142.00. Despite the slowdown, technical indicators maintain a stable sell signal: fast EMAs on the Alligator indicator are well below the signal line, and the AO histogram forms downward bars in the sell zone.

Resistance levels: 141.90, 146.90.

Support levels: 140.20, 136.35.

Trading tips

Short positions may be opened after the price declines and consolidates below 140.20, with the target at 136.35. Stop loss is 142.00. Implementation period: 7 days or more.

Long positions may be opened after the price grows and consolidates above 141.90, with the target at 146.90. Stop loss is 140.00.