Current trend

The USD/JPY pair is growing after the Bank of Japan’s monetary policy meeting and is testing 144.00 for a breakout: last Friday, the regulator kept the cost of borrowing at 0.25%, which weakened the yen, allowing the USD/JPY pair to reach the resistance level of 144.10.

Representatives of the department noted satisfactory rates of inflation growth: the indicator is moving in line with forecasts, so at the moment, there is no need to adjust monetary policy. Nevertheless, investors are pricing in at least one more increase in the cost of borrowing by 25 basis points before the end of the year. The next meeting is due on October 31, and until then, depending on macroeconomic statistics, the quotes may continue an upward correction or move sideways. On Wednesday at 07:00 (GMT 2), the core consumer price index, excluding the cost of food and energy, is due. It is a key measure of the trend in purchases and inflation in the country: it may be 1.8% YoY, which will be another argument in favor of keeping the interest rate at the current level, which will affect the national currency negatively. In September, the business activity index in the manufacturing sector slightly decreased from 49.8 points to 49.6 points, worse than the forecast of 49.9 points.

The US economy is showing contradictory dynamics. The September manufacturing PMI was 47.0 points, below the forecast of 48.6 points, and the service PMI increased to 55.4 points, exceeding the expectations of 55.3 points. This week, market participants will pay attention to the September Conference Board consumer confidence index due today at 16:00 (GMT 2) and the final data Q2 gross domestic product (GDP) due on Thursday. If the indicator meets the preliminary estimates of 3.0%, the American currency will strengthen since the economy will demonstrate resilience in the conditions of tight monetary policy. The publication of the actual value below expectations will weaken the dollar since investors will be waiting for another, possibly strong, interest rate cut by the US Fed in this case.

Support and resistance

The long-term trend is downward. However, the price is correcting upwards and is trying to overcome the resistance level of 144.10, after which it may reach 147.00, from where short positions with the target at 143.90 are relevant.

In the medium term, the asset is declining, breaking through the target zone of 143.89–143.38 in early September and heading towards zone 2 (138.78–138.30). Now, the quotes are correcting, approaching the trend line of 145.27–144.75. If it holds, short positions with the targets at 142.42 and 139.58 are relevant. Otherwise, the trend will change to an upward trend toward ​​150.88–150.32.

Resistance levels: 144.10, 147.00, 149.25, 151.50.

Support levels: 140.50, 137.63, 134.00.

Trading tips

Short positions may be opened from 147.00, with the target at 143.90 and stop loss 148.44. Implementation period: 9–12 days.

Long positions may be opened above 148.44, with the target at 151.50 and stop loss 147.00.