Current trend

The USD/JPY pair is developing a downward trend, testing the record lows of July 2023 at 140.20. Pressure on the position of the American currency is being exerted by expectations of a change in the monetary rate of the US Federal Reserve, whose two-day meeting begins tomorrow. The main scenario, as before, assumes a reduction in the interest rate by a minimum of 25 basis points, but the probability of an immediate adjustment of the value by –50 basis points is actively increasing and currently, according to the readings of the Chicago Mercantile Exchange (CME) FedWatch Tool, is 59.0% compared to 30.0% last week. At the same time, in the follow-up statement from the regulator, investors expect to hear signals about additional changes to the parameter before the end of the current year.

The Bank of Japan also meets later this week, and while the regulator is not expected to tighten monetary policy further, updated comments from its officials will be important. Also, on Friday, Japan will release updated inflation data for August, with the National Consumer Price Index excluding Fresh Food expected to accelerate slightly to 2.8% from 2.7%, giving the regulator a stronger hand in raising borrowing costs further. A Reuters poll published on Friday found that none of 52 economists believe the Bank of Japan will raise its interest rate at its September 19-20 meeting, but 54.0% of respondents believe the monetary authorities will adjust the rate by the end of the year, up from 57.0% in August. The median forecast was 25 basis points higher at 0.50%, the same as in the previous study. However, in a smaller sample, 23 economists favored the December adjustment.

The yen also received some support from statistics released at the end of last week: Industrial Production in July accelerated from 2.8% to 3.1%, and in annual terms — from 2.7% to 2.9%.

Support and resistance

Bollinger Bands on the daily chart show a steady decline. The price range expands from below, making way for new local lows for the "bears". MACD is going down preserving a stable sell signal (located below the signal line). After an unsuccessful attempt at corrective growth last week, Stochastic has once again reversed into a downward plane, but is located near its lows, indicating the risks of the instrument being oversold in the ultra-short term.

Resistance levels: 141.00, 141.76, 142.50, 143.35.

Support levels: 140.00, 139.35, 138.50, 137.50.

Trading tips

Short positions may be opened after a breakdown of 140.00 with the target at 138.00. Stop-loss — 141.00. Implementation time: 2-3 days.

A rebound from 140.00 as from support followed by a breakout of 141.00 may become a signal for opening new long positions with the target at 143.00. Stop-loss — 140.00.