Current trend

The USD/JPY pair continues moderate growth, renewing record highs. The instrument is holding near 161.65, while trading participants expect new drivers to appear on the market.

The day before, the focus of their attention was on a block of macroeconomic statistics from Japan on business activity. Tankan Services PMI in the second quarter fell from 34.0 points to 33.0 points, Tankan Large Manufacturers Index showed an increase from 11.0 points to 13.0 points, while most analysts expected the previous dynamics to remain unchanged, and the Manufacturing PMI in June decreased from 50.1 points to 50.0 points, approaching stagnation. A survey of business representatives showed that production volume is increasing due to the fulfillment of already received orders, but the number of new ones remains low due to limited external demand for Japanese products, especially for cars and semiconductors. The slowdown in the industrial sector could lead to an intensification of the economic contraction, and the government has already changed previous estimates: real Gross Domestic Product (GDP) may adjust by –2.9% in the first quarter, instead of the –1.8% previously expected, according to officials.

In turn, the US Manufacturing PMI from S&P Global fell from 51.7 points to 51.6 points, but remained significantly above the psychological level of 50.0 points, which separates growth from stagnation, while the indicator from the Institute for Supply Management (ISM) corrected from 48.7 points to 48.5 points, contrary to forecasts of 49.1 points. The central place among publications from the United States will be occupied by Friday's report on the labor market: analysts expect that Nonfarm Payrolls in June will decrease from 272.0 thousand to 195.0 thousand, the Average Hourly Earnings will slow down from 4.1% to 3.9% in annual terms and from 0.4% to 0.3% in monthly terms, and the Unemployment Rate will remain at 4.0%. It is expected that these data will clarify the prospects for the proposed reduction in the US Federal Reserve interest rate by the end of this year. As before, the main scenario assumes that the rate will be adjusted in September, and a total of one or at most two cuts of 25 basis points each is projected before the end of the year.

Support and resistance

Bollinger Bands on the daily chart show a steady increase. The price range expands, freeing a path to new local highs for the "bulls". MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic retains horizontal direction and is located near its highs, which indicates the risks of overbought US dollar in the ultra-short term.

Resistance levels: 162.00, 162.50, 163.00, 163.50.

Support levels: 161.30, 160.80, 160.25, 159.92.

Trading tips

Long positions can be opened after a breakout of 162.00 with the target of 163.00. Stop-loss — 161.30. Implementation time: 1-2 days.

A rebound from 162.00 as from resistance, followed by a breakdown of 161.30 may become a signal for opening of new short positions with the target at 159.92. Stop-loss — 162.00.