- With gains that reached its highest level in a year, the price of the US dollar currency pair against the Japanese yen (USD/JPY) moved with gains towards the resistance level of 149.98, on the doorstep from the psychological resistance of 150.00.
- As it is being discussed a lot, near the date of Japanese intervention in the financial markets to prevent further collapse of the Japanese yen, which will harm the Japanese economy particularly against the US dollar price.
- So far, the Japanese intervention is still verbal, but if there is an actual intervention in the markets, USD/JPY may be exposed to strong and sharp selling operations, with the current trend changing to bearish.
Strong Discrepancy between the US Federal Reserve and the BoJ Policies Affecting the Pair
As I mentioned before, the discrepancy between the US Federal Reserve’s strict policy and the Bank of Japan, which has negative interest rates, will remain an important factor for bulls to continue controlling the direction of the currency pair.
From an economic perspective, USD/JPY is trading influenced by the results of recent economic data. Specially, Japan's national CPI excluding fresh food for September beat expectations of 2.7% with a change (y/y) of 2.8%, down from 3.1%. In the same week, Japanese exports for September exceeded expectations (y/y) by 3.1% with a change of 4.3%, while Japanese imports for the period exceeded expectations by -12.9% with a change of -16.3%. Otherwise, the total merchandise trade balance for September was 62.4 billion yen, ahead of the expected balance of -425 billion yen, and up from -937.8 billion yen.
On the side of the United States of America, the Philadelphia Federal Reserve Bank's manufacturing survey for October exceeded expectations of -6.6 with a reading of -9. On the other hand, US existing home sales for September exceeded 3.89 million, with a total of 3.86 million. Also, Initial US unemployment claims for the week ending October 13 exceeded the expected number of claims of 212 thousand with a total of 198 thousand, while continuing claims for the previous week exceeded 1.71 million with 1.734 million. On the other hand, US building permits for September exceeded estimates of 1.45 million with 1.475 million, while housing starts for the period fell below 1.38 million with 1.358 million.
Furthermore, USD/JPY may affect sentiment towards the exchange rate. As the Nikkei reported, “Bank of Japan officials are considering the question of whether to adjust the settings of its yield curve control program with domestic long-term interest rates floating higher in conjunction with those in the United States.”
USD/JPY Forecast & Trading Outlook
The decline in Friday's trading session pushed the USD/JPY to the 100-hour moving average line. As a result, the pair appears to be moving near the oversold levels of the RSI on the 14-hour frame. In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY is trading within an upward channel. The MACD over the period also appears to be struggling for momentum amid slight bullish sentiment. Therefore, the bulls will target profits at around 150.00 or higher at the 150.45 resistance. On the other hand, the bears - the bears - will be looking to pounce on potential pullbacks at around 149.58 or lower at the 149.20 support.
In the long term, and according to the performance on the daily chart, it appears that USD/JPY is trading within an upward channel. However, the MACD over that period seems to be struggling to gain momentum as it attempts a potential crossover. Therefore, the bulls will target long-term profits at around 151.55 or higher at the 153.28 resistance. On the other hand, the bears will look to pounce on profits at around 148.15 or lower at the 146.25 support.
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