Current trend

The USD/JPY pair shows a slight increase, testing the level of 154.50 for a breakout. The activity of the US dollar "bulls" remains moderate as they are in no hurry to open new positions ahead of the US Federal Reserve meeting scheduled for Wednesday, July 31.

Analysts predict that the interest rate will remain at the previous level of 5.50%, but investors are counting on receiving additional confirmation of the regulator’s readiness to ease monetary policy in September. Also, in the spotlight this week will be Automatic Data Processing (ADP) data on private sector employment and a report from the US Department of Labor. According to preliminary estimates, Nonfarm Payrolls is expected to decline further in July from 206.0 thousand to 175.0 thousand, Average Hourly Earnings are expected to slow down from 3.9% to 3.7% year-on-year and increase by 0.3% month-on-month, and the Unemployment Rate is expected to remain at the previous level of 4.1%.

The Bank of Japan's meeting results will be released tomorrow at 05:00 (GMT 2): economists polled by Reuters expect the regulator to raise the benchmark interest rate to 0.10%, while analysts at financial group ING Groep in a note to clients last week said the figure could be adjusted to 0.15%, and Bank of America expects an increase to 0.25%. In June, Bank of Japan Governor Kazuo Ueda said the regulator might raise borrowing costs based on economic, price and financial data available at the time. Japan's CPI stood at 2.8% in June, unchanged from May, while the Core CPI excluding Fresh Food accelerated to 2.6% from 2.5%. At the same time, officials may again express concerns about a sharp weakening of the national currency, which was trading near record lows at 162.00 in early July.

Japan releases June Industrial Production and Retail Sales data tomorrow, with forecasts calling for a sharp 4.8% slowdown in Industrial Production after a 3.6% rise in the previous month, while Retail Sales could rise to 3.3% from 3.0%.

Support and resistance

Bollinger Bands on the daily chart show a steady decline. The price range is narrowing actively, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD indicator tries to reverse to growth and to form a new buy signal (the histogram is about to consolidate above the signal line). Stochastic demonstrates similar dynamics, actively retreating from its lows and currently located approximately in the center of its area.

Resistance levels: 155.00, 155.50, 156.00, 156.50.

Support levels: 154.50, 154.00, 153.50, 153.00.

Trading tips

Long positions can be opened after a breakout of 155.00 with the target of 156.00. Stop-loss — 154.50. Implementation time: 1-2 days.

A rebound from 155.00 as from resistance, followed by a breakdown of 154.50 may become a signal for opening of new short positions with the target at 153.50. Stop-loss — 155.00.