Current trend

The USD/JPY pair is trading with near-zero dynamics, holding at 148.00. The day before, the instrument demonstrated a moderate decline, retreating from its local highs of August 16, which became a natural reaction of the market after the significant strengthening of the American currency last Friday.

On October 4, September labor market statistics were released, which further reduced the likelihood of rapid easing of monetary policy by the US Federal Reserve before the end of this year. Nonfarm Payrolls increased by 254.0 thousand after rising by 159.0 thousand (revised from 142.0 thousand) in the previous month, compared to the 140.0 thousand estimate, Average Hourly Earnings accelerated to 4.0% from 3.9% year-on-year, compared to the 3.8% estimate, and the Unemployment Rate slowed down to 4.1% from 4.2%. The day before, some pressure on the position of the American currency was exerted by data on Consumer Credit Change: in August, the indicator sharply decreased from 25.45 billion dollars to 8.93 billion dollars, while analysts expected 12.0 billion dollars. In turn, statistics from Japan, presented yesterday, reflected a decrease in the Leading Economic Index index in August from 109.3 points to 106.7 points with expectations of 107.4 points, and the Coincident Index fell from 117.2 points to 113.5 points.

While central banks in the US, UK and the eurozone have begun to ease monetary conditions after aggressive tightening cycles to control inflation, the Bank of Japan's monetary policy stands in contrast as the country faces decades of deflation and stagnation. The national economy recovered in the second quarter, driven by stronger household and business spending: core inflation rose 2.8% in August, accelerating for the fourth month in a row, and real wages increased for the second month in a row, which in turn boosted consumption, leading more companies to pass on labor costs, indicating progress toward meeting the preconditions for further interest rate hikes. However, the regulator warned that some small and medium-sized businesses were struggling to generate sufficient profits to meet the required wage indexation. At the same time, analysts are skeptical that monetary authorities will adjust borrowing costs at their October meeting, raising the possibility of such an event in December if economic indicators continue to show resilience.

Today, investors are focusing on data from Japan: Labor Cash Earnings in August slowed down from 3.4% to 3.0%, while the market expected 3.1%, Overall Household Spending fell 1.9% after increasing by 0.1%, while preliminary estimates were –2.6%. The Eco Watchers Current Situation Index fell from 49.0 points to 47.8 points in September, while the Forecast for Developments fell from 50.3 points to 49.7 points.

Support and resistance

Bollinger Bands on the daily chart show a steady increase. The price range is expanding but it fails to conform to the surge of "bullish" sentiments at the moment. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic, having retreated from its highs, reversed into a descending plane, signaling in favor of the development of a full-fledged "bearish" trend in the ultra-short term.

Resistance levels: 148.21, 149.50, 150.50, 151.50.

Support levels: 147.00, 146.00, 145.00, 144.00.

Trading tips

Short positions may be opened after a breakdown of 147.00 with the target at 145.00. Stop-loss — 148.21. Implementation time: 2-3 days.

The return of the "bullish" trend with the breakout of 148.21 may become a signal for new purchases with the target of 150.50. Stop-loss — 147.00.