Current trend

The USD/JPY pair is correcting to 149.30 after comments by newly appointed Japanese Finance Minister Katsunobu Kato. On Monday, he said the government would take the necessary measures to adjust the yen rate.

The Japanese government is likely concerned about the excessive amplitude of fluctuations in the national currency. Over the past three months, it has strengthened against the American dollar by 10.65% and 3.23% over the past two weeks. According to Kato, the country needs to monitor how excessive fluctuations in exchange rates will affect the activities of corporations and households. He said that the Bank of Japan will communicate carefully with the markets and adopt appropriate policies to achieve the 2% inflation target stably and sustainably. The minister also added that he would leave the issue of interest rates to the regulator’s discretion. Thus, investors took the official’s rhetoric positively, hoping it would slightly halt the excessive weakening of the national currency.

The current growth of the USD/JPY pair is likely to be corrective before the downward trend intensifies. The next meeting of the Bank of Japan is due on October 31, and analysts expect the regulator to raise the interest rate by 25 basis points again, supporting the yen.

The American dollar is strengthening thanks to positive data on the labor market. September nonfarm payrolls amounted to 254.0K, exceeding the forecast of 147.0K, and the August value changed from 142.0K to 159.0K. Unemployment fell from 4.2% to 4.1%, better than analysts expected, who believed the indicator would remain at the same level. However, the dollar may remain under pressure due to the US Fed’s monetary policy easing. The next meeting is due on November 7, and economists expect another rate cut, this time by 25 basis points.

Support and resistance

The long-term trend remains downward. Now, a correction is developing, within which the price has approached the resistance level of 149.25. If it holds, a decline with the targets of 145.20 and 141.61 may follow.

The medium-term trend reversed upwards last week after the breakout of the key resistance area of ​​145.27–144.75. The growth target is zone 2 (151.68–151.04), and the support area is shifting to 142.99–142.41. If reached, long positions with the targets of 145.78 and 149.13 are relevant.

Resistance levels: 149.25, 151.50, 154.80.

Support levels: 145.20, 141.60, 139.58.

Trading tips

Short positions may be opened from 149.25, with the target at 145.20 and stop loss 150.65. Implementation period: 9–12 days.

Long positions may be opened above 151.50, with the target at 154.80 and stop loss 150.00.