Current trend

The USD/JPY pair is holding in the area of 146.60, updating local highs from August 20 after the publication of macroeconomic statistics from the US. Automatic Data Processing's (ADP) September private sector employment report showed an increase from 103.0 thousand to 143.0 thousand, compared to a forecast of 120.0 thousand. Tomorrow at 14:30 (GMT 2), the US will present the final September data on the labor market: it is expected that Nonfarm Payrolls will remain at 140.0 thousand, and the Average Hourly Earnings in annual terms will be at 3.8%, while in monthly terms the growth rate of the indicator may slow down slightly from 0.4% to 0.3%, which will indirectly mean a further weakening of inflation risks. The Unemployment Rate is likely to remain around 4.2%.

It is also worth noting that the level of uncertainty regarding the upcoming US Federal Reserve meeting in November was leveled at the beginning of this week after the speech of the Chair of the regulator, Jerome Powell, who spoke out against the high rate of reduction in the cost of borrowing and called for abandoning hasty conclusions and decisions in the area of monetary policy. Against this backdrop, markets have significantly reduced expectations for a second interest rate adjustment of –50 basis points in November. According to the Chicago Mercantile Exchange (CME Group) FedWatch Tool, the probability of such a scenario is about 35.0%, while at the beginning of the week it exceeded 50.0%.

Some pressure on the yen's position is being exerted by statistics from Japan: the Jibun Bank Manufacturing PMI fell from 53.9 points to 53.1 points in September, while analysts had expected the previous dynamics to be maintained. In turn, Bank of Japan Governor Kazuo Ueda said that the regulator will closely monitor trading volatility before making a decision to adjust monetary parameters. He also stressed that the outlook for the US and global economies remains uncertain and financial markets remain volatile, but noted that inflation is gradually reaching the 2.0% target. The official had previously said that another rate hike was possible if members of the Monetary Policy Council were confident in the forecasts for consumer price dynamics and economic activity, but new Japanese Prime Minister Shigeru Ishiba stressed the day before that it was not appropriate for the Bank of Japan to raise borrowing costs in the current market situation. Japan's State Minister of Finance Ryosei Akazawa also urged the central bank to be cautious about further tightening, acknowledging that the current borrowing cost of 0.25% is below "global standards" and adding that monetary authorities should do their utmost to address the priority deflationary problem.

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 grows, preserving a stable buy signal (located above the signal line). The indicator is also trying to consolidate above the zero level. Stochastic keeps its upward direction but is rapidly approaching its highs, which reflects the risks of overbought American dollar in the ultra-short term.

Resistance levels: 147.00, 148.21, 149.50, 150.50.

Support levels: 146.00, 145.00, 144.00, 143.35.

Trading tips

Long positions can be opened after a breakout of 147.00 with the target of 149.50. Stop-loss — 145.90. Implementation time: 2-3 days.

A rebound from 147.00 as from resistance, followed by a breakdown of 146.00 may become a signal for opening of new short positions with the target at 144.00. Stop-loss — 147.00.