Current trend

The American dollar is showing ambiguous dynamics in the USD/JPY pair, holding around 145.15. The “bearish” momentum formed late last week is gradually leveling off, as investors prefer to wait for the results of the annual Jackson Hole Economic Symposium, while the yen retains high prospects for continuing its upward momentum amid stable macroeconomic indicators.

Thus, the Japanese manufacturing PMI was only 49.5 points compared to 49.1 points in July, reflecting lingering problems as leading automakers reported production disruptions due to the ongoing government investigation into falsified safety inspections. The service PMI sector is much better, and the indicator grew to 54.0 points from 53.7 points previously, which signals a recovery in demand.

As for the US currency, it is trading in a correction trend around 101.0 points in USDX. Markets are preparing for a rate cut in September, which no longer looks like a forecast but almost a fait accompli. Some clarity in the plans of the monetary authorities may be brought by the speech of the head of the US Fed Jerome Powell at the annual Economic Symposium in Jackson Hole, where he may give signals about the timing and volume of reduction in the cost of borrowing. At the moment, experts assume a reduction in the indicator by –25 basis points or –50 basis points in September, as well as one or two more revisions by –25 basis points before the end of the calendar year. The minutes of the last meeting were published yesterday. In July, the majority of the officials expressed their readiness to vote for a reduction in the interest rate by 25 basis points but it was decided to postpone the adjustment for another month. Currently, the Chicago Mercantile Exchange (CME) FeedWatch Instrument indicates a 65.5% probability of this scenario being realized. In the case of positive dynamics in the labor market, statistics for which will be presented today, the possibility of changes will increase even more.

Support and resistance

On the daily chart, the instrument is correcting downwards as part of a possible local Flag pattern with a sales start level at 146.00.

Despite the correction, technical indicators maintain a stable signal to open short positions: fast EMAs on the Alligator indicator are much lower than the signal line, and the AO oscillator histogram, consolidation in the sales zone, continues to form new downward bars.

Support levels: 144.10, 140.30.

Resistance levels: 146.10, 149.40.

Trading tips

Short positions may be opened after the price consolidates below 144.10, with the target at 140.30. Stop loss is 146.00. Implementation period: 7 days or more.

Long positions may be opened after the price consolidates above 146.10, with the target at 149.40. Stop loss is 144.50.