USDJPY rebound in play as 146.5–147 support zone nears

After testing the 150 level last week, the USDJPY pair failed to hold at two-month highs and returned to the 146.5–147 support range. This zone has halted all downward momentum since July, and it is now backed by the medium-term uptrend and the nearby 100-day moving average. These factors improve the potential for a price rebound toward 148.5.

Even so, technical indicators suggest there could be more declines before bulls take the lead. The Stochastic lines are approaching oversold territory, but a crossover has not yet occurred. A definitive buy signal may only materialize once the dollar begins to recover from its recent losses against the yen. This potential rally would be invalidated if quotes reach 146.

The upcoming release of the key September labor market report is in doubt due to the ongoing US government shutdown, which forces traders to rely on conflicting private data. Recent ADP figures show a decline in employment alongside a rise in job openings. Following better-than-expected manufacturing PMIs, investor focus will likely shift to business activity indices, with critical services sector data due on Friday.

In Japan, the primary market event is the October 4 election to determine a new leader of the Liberal Democratic Party (LDP). After losing its parliamentary majority in the summer vote, the new LDP head must negotiate with opposing parties to pass economic reforms. These fractions are demanding significant hikes in government spending and tax cuts—measures that would add to the country's substantial national debt. Concessions on these issues by the new leader would likely place the yen under renewed pressure.

The trading strategy detailed below might be considered:

Buy USDJPY in the 146.5–147.5 range. Take profit: 148.5. Stop loss: 146.