Current trend

The USD/JPY pair is falling to the area of 146.05 amid the strengthening of the yen after the publication of macroeconomic statistics.

Thus, gross domestic product increased by 0.8% QoQ instead of the expected 0.6%, and YoY – by 3.1% with a forecast of 2.1%. Q2 consumer spending adjusted by 1.0%, higher than preliminary estimates of experts at 0.5%, and the key indicator of capital expenditure, the volume of orders in the mechanical engineering sector, by 2.1% MoM, exceeding estimates of 1.1%. These statistics significantly increase the likelihood of tightening monetary policy by the Bank of Japan. Recall that officials have previously stated that a sustainable economic recovery will help inflation reach the target of 2.0%, which will justify further changes in the interest rate. On Friday at 01:30 (GMT 2), market participants will focus on the key event of the week – the publication of statistics on the consumer price index: current forecasts suggest a slight increase in the indicator excluding the cost of fresh food from 2.6% to 2.7% YoY.

Meanwhile, the dollar is actively losing ground after “dovish” comments from US Fed officials, who increased expectations of an interest rate cut in September. Federal Reserve Bank of San Francisco President Mary Daly emphasized on Sunday that officials should gradually adjust the cost of borrowing. Chicago Fed President Austan Goolsbee warned that the regulator should be wary of maintaining restrictive policies longer than the economic situation requires. At the end of July, the consumer price index YoY fell to 2.9%, lower than the forecast of 3.0%, and the producer price index – from 2.7% to 2.2%. After the publication of this data, the probability of adjusting the rate by –25 basis points during the September meeting reached 71.5%, according to the Chicago Mercantile Exchange (CME) FedWatch Instrument.

Support and resistance

The long-term trend remains downward. Last week, the pair corrected upwards and reached the resistance level of 149.25, kept by sellers, which became a catalyst for the decline. If the downward trend continues, a test of 143.80 is likely, which market participants will try to break through downwards. If successful, the next sales target will be the 140.80 level.

The medium-term trend reversed upwards. Traders broke through the key trend resistance of 146.41−145.98, and now the target of long positions is zone 2 (152.23−151.65). At the moment, there is a downward correction. If it continues, the key trend support of 143.89−143.38 may be reached. After testing the zone, it is worth considering long positions, with the target at the high of last week at 149.33.

Resistance levels: 149.25, 152.40, 154.80.

Support levels: 143.80, 140.80, 138.80.

Trading tips

Long positions may be opened at the level 143.80, with the target at 149.25 and stop loss 142.33. Implementation period: 9–12 days.

Short positions may be opened below 142.33, with the target at 138.80 and stop loss 143.80.