Current trend

Last week, USD/JPY broke the 143.90 support area but today, it is rising to 143.16 after the release of Japanese economic data.

Thus, the Q2 gross domestic product (GDP) volume increased by 0.7% QoQ, below the forecast of 0.8%, while the previous value was corrected from –0.5% to –0.6%. The indicator amounted to 2.9% YoY compared to the estimates of 3.1%, decreasing from –1.8% to –2.4% in the previous period, and the GDP deflator increased from 3.0% to 3.2%, exceeding expectations, which increases inflation risks. However, the local weakening of the yen is likely to be short-lived, as last week, the head of the regulator, Kazuo Ueda, argued that further interest rate hikes are likely as the consumer price index is above the target level of 2.0%, at 2.8%, and the core value is 2.7%.

The American dollar is strengthening after the publication of labor market data on Friday. The August nonfarm payrolls amounted to 142.0K, below the forecast of 164.0K, and the previous value decreased from 114.0K to 89.0K but the unemployment rate decreased from 4.3% to 4.2%, meeting investors’ expectations. Thus, market participants are currently focusing on this indicator, the weakening of which reflects the sector’s resilience to peak interest rates. As a result, the Fed’s September borrowing cost adjustment by –25 basis points becomes a priority relative to –50 basis points, according to the Chicago Mercantile Exchange (CME) FedWatch Instrument.

Support and resistance

In the long term, the trading instrument is declining, breaking through the support level of 143.90 last week. After consolidating below 140.80, it may reach the July 2023 low of 137.63. The nearest resistance level from which short positions can be considered is 144.10.

The medium-term trend remains upward. Despite testing the key trend support area of ​​143.89–143.38 last week, the price is returning to this zone. After consolidation above 143.89, long positions, with the targets of 146.40 and the high of 149.39 of August, 15, are relevant. If the low of the previous week is broken, the trend will change to a downward trend towards zone 2 (138.78–138.30).

Resistance levels: 144.10, 147.00, 149.25.

Support levels: 140.80, 137.63.

Trading tips

Short positions may be opened from 144.10, with the target at 140.80 and stop loss 145.60. Implementation period: 9–12 days.

Long positions may be opened above 145.60, with the target at 149.25 and stop loss 144.10.