Current trend

The USD/JPY pair rose to 142.98 on the back of the Bank of Japan Governor’s rhetoric.

On Thursday, when asked about the possibility of another interest rate hike by the end of this year or by March next year, the official stressed that the exact timing would depend on economic and price conditions. Unlike the US and EU, where the rate adjustment is faster, in Japan this process will probably be more gradual. Now, according to Tamura, the national economy is developing in line with the forecasts made at the July meeting of the department but excessive concentration on market stability may prevent the regulator from conducting monetary policy adequate to current price conditions. Although markets tend to follow fundamental factors in the long term, unwanted volatility can complicate the management of the economy, and in such cases, they needs time to cool down. The official stressed that the Bank of Japan should gradually raise borrowing costs, closely monitoring how each step affects market activity, to prevent excessive fluctuations. Amid this rhetoric, the USD/JPY pair renewed Wednesday’s high of 142.55 and reached 143.04.

The American dollar is strengthening after the publication of inflation data released yesterday. The August consumer price index was 0.2% MoM and 2.5% YoY, justifying forecasts. After that, the currency added 0.45%, reaching 101.67 in the USDX after testing lows in the 101.21 area earlier. The probability of a significant cut in the US Fed rate by 50 basis points has decreased from 34.0% to 13.0%, and the adjustment of the indicator by –25 basis points is considered in price.

Support and resistance

In the long term, the trading instrument is declining, renewed the low of 2024 at 140.80 yesterday. It is a strong support level, where a correction began. If it develops, the price may reach the resistance level of 144.10 and the next target of 147.00.

The medium-term trend reversed downwards this week, and the quotes broke the zone of 143.89–143.38, heading to the area of ​​138.78–138.30. Short positions may be opened on the correction after reaching the key resistance level of the new trend 146.50–145.96, with the target at the low of the current week 140.70.

Resistance levels: 144.10, 147.00, 149.25.

Support levels: 140.80, 137.63, 134.00.

Trading tips

Short positions may be opened from 144.10, with the target at 140.80 and stop loss 145.60. Implementation period: 9–12 days.

Long positions may be opened above 145.60, with the target at 149.25 and stop loss 144.10.