Current trend

USD/JPY is showing a slight decline, trying to develop a strong "bearish" momentum formed last Friday. The instrument is testing 141.70 for a breakdown, while investors are assessing macroeconomic statistics from Japan.

Industrial Production in August fell by 3.3% after increasing by 3.1% against a forecast of –0.9%, and in annual terms the figure fell sharply by 4.9% after growing by 2.9%. In turn, Retail Sales accelerated from 2.7% to 2.8% year-on-year, against preliminary estimates of 2.3%, and from 0.2% to 0.8% month-on-month, while Large Retailer Sales increased from 1.0% to 5.0%. Housing Starts fell 5.1% after falling 0.2% in the previous month, while Construction Orders fell 62.8% to 8.7%.

Meanwhile, the yen is receiving additional support from the election victory of the leader of the country's ruling Liberal Democratic Party, former Japanese Defense Minister Shigeru Ishiba. The official said the Bank of Japan, which is mandated to achieve price stability, will work closely with the government and monetary policy should remain accommodative given current economic conditions. In this, his position differs markedly from that of his main rival, Sanae Takaichi, whose victory was predicted by a greater number of analysts. On fiscal policy, Ishiba said he intends to put together a package of measures to reduce the cost of living in the near future, with a particular focus on helping low-income households. Earlier, Bank of Japan Governor Kazuo Ueda signaled that he was prepared to further raise borrowing costs if the regulator made progress in reaching the 2.0% inflation target.

Today at 15:45 (GMT 2), the US will present September statistics on Chicago Purchasing Managers' Index, forecasts for which suggest growth from 46.1 points to 46.5 points, as well as Dallas Fed Manufacturing Business Index, where an increase from –9.7 points to –4.5 points is expected. In addition, at 19:00 (GMT 2), the Chair of the US Federal Reserve, Jerome Powell, will speak.

Support and resistance

Bollinger Bands on the daily chart demonstrate flat dynamics. The price range is trying to consolidate, while remaining spacious enough for the current activity level in the market. MACD is declining, having formed a new sell signal (located below the signal line). Stochastic shows a more confident decline but at the moment it is rapidly approaching its lows, indicating risks of the US dollar being oversold in the ultra-short term.

Resistance levels: 142.50, 143.35, 144.00, 145.00.

Support levels: 141.76, 141.00, 140.00, 139.35.

Trading tips

Short positions can be opened after a confident breakdown of the current support at 141.76 with a target of 140.00. Stop-loss — 142.50. Implementation time: 1-2 days.

A rebound from 141.76 as from support followed by a breakout of 142.50 may become a signal for opening new long positions with the target at 144.00. Stop-loss — 141.76.