Current trend

The USD/JPY pair shows insignificant growth, developing a weak "bullish" momentum formed at the end of last week. The instrument is testing 149.30 for a breakout, preparing to update the local highs of early August. Activity remains muted at the start of the week, however, as the US trading floors are closed for Columbus Day and investors are analyzing inflation data released late last week.

The Core Consumer Price Index excluding Food and Energy rose to 3.3% year-on-year in September from 3.2%, compared with neutral forecasts, and remained at 0.3% month-on-month, while experts expected 0.2%, with the broader measure slowing to 2.4% year-on-year from 2.5%, compared with expectations of 2.3%. In turn, the Producer Price Index fell from 1.9% to 1.8% with preliminary estimates of 1.6% in annual terms and adjusted from 0.2% to 0.0%, ahead of forecasts of 0.1%, in monthly terms, while the annual Core PPI accelerated from 2.6% to 2.8%, while analysts expected 2.7%. Separately, market participants drew attention to the decline in the Consumer Confidence index from the University of Michigan in October from 70.1 points to 68.9 points, while analysts expected the indicator to rise to 70.8 points.

Tomorrow at 01:50 (GMT 2), Japan will publish August Industrial Production data: the previous negative dynamics in monthly terms are expected to remain at –3.3%. September inflation data hits the market on Friday, with preliminary estimates showing the National Consumer Price Index excluding Fresh Food to slow sharply to 2.3% from 2.8%, which could significantly dampen expectations for further monetary tightening by the Bank of Japan.

Support and resistance

Bollinger Bands on the daily chart show a steady increase. The price range expands, freeing a path to new local highs for the "bulls". MACD shows a more restrained growth, but maintains a relatively strong buy signal for a long time (the histogram is located above the signal line). Stochastic, having retreated from its highs last week, still maintains a confident downward direction, signaling in favor of the development of a corrective decline in the near future.

Resistance levels: 149.50, 150.50, 151.50, 152.50.

Support levels: 148.24, 147.00, 146.00, 145.00.

Trading tips

Long positions can be opened after a breakout of 149.50 with the target of 151.50. Stop-loss — 148.24. Implementation time: 2-3 days.

A rebound from 149.50 as from resistance, followed by a breakdown of 148.24 may become a signal for opening of new short positions with the target at 146.00. Stop-loss — 149.50.