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USD/JPY Technical Analysis: Waiting for Central Bank

This week, the dollar/yen pair will be watched closely with the announcement of the policies of both the US Federal Reserve Bank and the Japanese Central Bank. Before these important and influential events, the price of the USD/JPY currency pair remains stable around its gains. The gains reached its highest resistance level of 147.95 since ten months. Core inflation in the United States recorded a faster-than-expected monthly pace in August, leaving the door open for further increases in US interest rates by the Federal Reserve Bank. These numbers reinforce the financial pressures that American families have been suffering for more than a year.

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    The United Auto Workers began a strike Friday against Detroit's three automakers, an unprecedented move that could set off a costly and protracted showdown over wages and job security. For its part, General Motors has offered increases of 20% over four years, and cost of living increases and reinforcements for current retirees. Consumers are increasingly concerned about their ability to take advantage of credit, with the percentage of households saying that getting credit is now more difficult or somewhat more difficult than last year, rising to the highest level since the New York Federal Reserve Bank survey began in June 2013. More people expect it to be difficult to get credit next year.

    Overall, inflation-adjusted household income in the United States in 2022 fell by the most in more than a decade, highlighting the toll of rising costs of living and the end of pandemic-era programs. The 2.3% decrease in income - the largest since 2010 - was the third annual decrease in a row, which was a feature of past recessions such as the global financial crisis, the dot-com bubble, and the recession in the early 1990s.

    Technical analysis of the dollar-yen pair:

    • The USD/JPY pair is rising now to trade at a few levels above the 100-hour moving average.
    • Friday's late pullback prevented the currency pair from rising to 14-hour RSI overbought levels.
    • In the near term and according to the performance on the hourly chart, it seems that the USD/JPY currency pair is trading within the formation of an ascending channel.
    • However, the MACD seems to be losing momentum with the possibility of a bearish crossover.

    Therefore, the bearish speculators will target extended pullbacks at around 147.45 or below at the 147.06 support. On the other hand, the bulls will look to pounce on profits at around 148.17 or higher at the 148.59 resistance.

    In the long term and according to the performance on the daily chart, it also seems that the USD/JPY currency pair is trading in a bullish channel. However, just like on the hourly chart, the daily MACD is struggling for momentum with the possibility of a bearish crossover. Therefore, the bearish speculators will target possible pullbacks at around 146.41 or lower at the 144.84 support. On the other hand, the bulls will look to pounce on long-term profits around the 149.41 resistance or higher at the 151.06 resistance.

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    Mahmoud Abdallah
    About Mahmoud Abdallah
    Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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