Last week, the “bulls” broke the June high of 139.20 and set a new price record around 144.75, after which the USD/JPY pair corrected downwards, reaching 141.90. The catalyst for the downward dynamics was strong macroeconomic statistics from Japan.
Thus, the gross domestic product (GDP) added 0.9% QoQ and 3.5% YoY, which was significantly better than the 0.5% and 2.2% shown in the previous period, and also stronger than market forecasts for 0.7% and 2.9%, respectively. Despite the positive data, the Bank of Japan is cautious about tightening monetary stimulus. However, according to the rhetoric officials, the agency intends to end the financial assistance program for households and businesses during the spread of COVID-19. Analysts agree that the ultra-low interest rate will be maintained at the September 21–22 meeting, allowing the USD/JPY pair to continue its upward momentum.
The rapid growth of the exchange rate of the trading instrument is due to different approaches to conducting monetary policy in the US and Japan. According to the CME FedWatch Instrument, traders are 90% confident that the US agency will raise interest rates by 75.0 basis points to 3.25%. The latest data on the national labor market confirms its active recovery, which, in turn, should mitigate the pressure of a high indicator on the economy: last week, Initial Jobless Claims were lower than preliminary estimates of 240.0K, amounting to 222.0K.
The long-term trend is upwards. After reaching the resistance level of 144.75, the USD/JPY pair went into a correction and tested 141.90. If it is broken down, the quotes movement will intensify at 139.00. The RSI indicator has entered the overbought area, which means that a correction may develop in the medium term.
The medium-term trend is upwards. Last week the traders reached the target zone 3 (143.11–142.67), which was eventually held, so the key support level is shifting to the area of 140.50–140.07. If this area is reached within the correction, then the traders will have the opportunity to consider long positions in the asset.
Resistance levels: 144.75, 148.50. | Support levels: 141.90, 139.00, 136.00.