USD/JPY: the yen returns to major support

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

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

The next catalyst to watch will be the first US inflation figures for September, released on Thursday. Consensus calls for core inflation to pick up 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 bolster expectations of a Fed rate hike, which would support USD/JPY and reduce the chances of a pullback towards 140.

Entry: Sell below 145.50

Stop: 146.50

Objective: 142, then 140

Risk/reward ratio: >3

Follow the price action of USD/JPY with IG.


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