Current trend

The USD/JPY pair is correcting in a poor uptrend at 158.64 after a sharp decline caused by the actions of the Bank of Japan.

Market participants are confident that the currency intervention to support the national currency was carried out last week, but the long-term effect of these actions seems limited since the cost of borrowing in the country remains significantly lower than all major competitors, and further tightening of monetary policy may be very slow. Investors will get more information from the central bank’s balance sheet report. The latest data was published on July 12, before the operation began, and the next one will appear by the end of the week. Currently, the national currency is under pressure from macroeconomic statistics. The June service PMI fell by 0.4% after growing by 1.9%, confirming the weakness of the Japanese economy.

The American dollar is moving in a corrective trend, trading at 103.90 in the USDX. The currency reacted neutrally to the speech of the US Fed Chairman Jerome Powell at the Economic Club of Washington, who repeated that confirmation from macroeconomic data is needed to move to a “dovish” course. Now, despite the decline in the June personal consumption expenditure index from 2.6% to 2.5%, they are not enough, and the Chicago Mercantile Exchange (CME) FedWatch Instrument reflects a 91.2% probability of keeping interest rates unchanged at the meeting on July 31.

Support and resistance

On the daily chart, the trading instrument is moving within the ascending channel 163.00–157.70, moving away from the support line. Technical indicators are in a state of uncertainty, and the upward signal is almost completely canceled: fast EMA on the Alligator indicator approached the signal line, and the AO histogram forms correction bars in the buy zone.

Resistance levels: 159.40, 161.70.

Support levels: 157.70, 154.70.

Trading tips

Long positions should be opened after the consolidation above 159.40, with the target at 161.70. Stop loss is 158.70. Implementation period: 7 days or more.

Short positions may be opened after the price declines and consolidates below 157.70, with the target at 154.70. Stop loss is 159.00.