USD/JPY: Yen returns to major support

USD/JPY could come back to test 140 in the near term

USD/JPY could therefore retrace below 145-146 and return to test the 140 symbolic threshold in the near term. Nevertheless, the exchange rate should quickly come back to test the resistance zone, or even exceed it, because the fundamentals remain unfavorable for the yen. In fact, the Bank of Japan is expected to remain accommodative and is not expected to normalize its monetary policy as inflation in the country, unlike other major economies, is expected to peak at 3% this year before falling to 2% next year.

The next catalyst to watch will be the first US inflation figures for September due out on Thursday. Consensus calls for core inflation to rise to 6.5% from 6.3% in August, while the Cleveland Fed estimates it at 6.6%. In the event of an upside surprise, this would reinforce expectations of a Fed rate hike, which would support USD/JPY and reduce the chances of a pullback towards 140.

Entrance: Sell below 145.50

Stop: 146.50

Measure: 142, then 140

Risk/reward ratio: >3

Follow the price action of USD/JPY with IG.

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