Current trend

The American dollar is gaining in value in the USD/JPY pair during the Asian session on August 21, correcting after a confident three-day “bearish” rally, following which the quotes retreated from the highs of August 2 to the lows on August 7. At the moment, the instrument is testing 145.70 for a breakout. Still, the American currency has limited potential for growth since analysts expect the publication of the July US Fed monetary policy meeting minutes today at 20:00 (GMT 2).

The document may contain signals to the market about the pace and size of the interest rate cut. Some analysts still assume that the financial authorities may decide to adjust it by –50 basis points and will conduct two more reductions in the indicator by the end of the year. Also in the focus of the market’s attention on Friday will be the speech of the US Fed Chairman Jerome Powell at the annual Economic Symposium in Jackson Hole. He may keep the “dovish” rhetoric, given the relatively low inflation and limited risks of recession in the American economy.

The yen is under pressure due to July foreign trade data. Exports grew by 10.3% YoY compared to 5.4% earlier, although forecasts assumed a correction of 11.4%, and imports showed more rapid dynamics from 3.2% to 16.6% with preliminary estimates of 14.9%. It led to a deficit in the overall trade balance of 621.8B yen, almost twice as high as expected by experts – 330.7B yen against 224.0B yen last month.

On Friday, the focus of market participants will shift to July statistics on the national consumer price index, which may rise from 2.6% to 2.7%, allowing the Bank of Japan to continue the monetary stimulus tightening. The political uncertainty caused by Prime Minister Fumio Kishida’s decision to resign will most likely lead to a pause, rather than a complete stop, in the plan to raise the interest rates gradually. According to Japanese media reports, the ruling Liberal Democratic Party has scheduled elections for a new leadership for September 27, and analysts call Shigeru Ishiba the most likely candidate for the post of head of government. He has already supported the financial regulator’s “hawkish” course. Earlier, Japanese Economy Minister Yoshitaka Shindo said that a gradual economic recovery was expected as wages and incomes rise, adding that the government intended to work closely with the Bank of Japan to implement a flexible macroeconomic policy.

Support and resistance

On the daily chart, Bollinger Bands try to reverse into the horizontal plane: the price range is expanding from below, letting the “bears” renew local lows. MACD is also trying to reverse, maintaining the previous sell signal and located below the signal line. Stochastic shows a more confident downward trend and is currently rapidly approaching the lows, indicating that the US currency may become oversold in the ultra-short term.

Resistance levels: 146.00, 147.00, 148.21, 149.50.

Support levels: 145.00, 144.00, 143.35, 142.50.

Trading tips

Short positions may be opened after a breakdown of 145.00, with the target at 143.00. Stop loss – 146.00. Implementation period: 2–3 days.

Long positions may be opened from 145.00 with a breakout of 146.00, with the target at 148.21. Stop loss – 145.00.