The USDJPY pair has continued to trade within its established range of 146.8–148.5 for over a month, repeatedly bouncing off its boundaries. Last week's attempt to break out of this territory ultimately failed, resulting in a rollback to previous levels. The next likely move for the currencies is to test the 146.8 support. In this context, any upward shifts can be seen as opportunities to open short positions at more favorable prices.
The pair's upward momentum is currently constrained by the 148.5 resistance and the 200-day moving average. This moving average previously prevented USDJPY from consolidating above 150 in late July, and it has since declined below 149. On the daily chart, the MACD indicator is nearing negative territory for the first time since June. Back then, quotes were significantly lower, hovering between 142 and 145.
On Thursday, the currency market will focus on the upcoming US inflation data for August. While some fear that an uptick in price growth could make the Federal Reserve (Fed) maintain its stringent policy, despite the expected rate cut on September 17, yesterday's surprisingly negative PPI data provides backing for a more extensive loosening of monetary policy. Nevertheless, even if figures come in higher than anticipated, a sustained increase of USDJPY past the 148.5–149 range is unlikely to happen.
Meanwhile, according to recent Bloomberg and Reuters polls, investors are still waiting for a rate hike from the Bank of Japan at an upcoming meeting. Although Prime Minister Shigeru Ishiba's resignation has introduced uncertainty regarding the timing, most expect a policy tightening in October or December. Furthermore, the terminal rate estimate for this hiking cycle has increased from 1% to 1.25% due to persistent inflationary pressures.
The following trading strategy may come into play:
Sell USDJPY in the 147.5–148.5 range. Take profit: 146.8. Stop loss: 149.
This content is for informational purposes only and is not intended to be investing advice.
