The USD/JPY pair has experienced a slight increase, reaching 145.95 on Wednesday morning. This movement represents a rebound from two-week lows; however, it is premature to predict a significant reversal in the trend given the current economic conditions. Market participants are exercising caution as they await the release of crucial US employment market data for August later this week. These upcoming figures are expected to have a substantial impact on the Federal Reserve’s future decisions.
Bank of Japan’s Policy Stance
On the Japanese front, the Bank of Japan (BoJ) has opted to maintain its existing policy stance but has hinted at potential adjustments if economic projections align with actual outcomes. This cautious yet responsive approach, including the possibility of an interest rate hike in December, highlights the BoJ’s dedication to ensuring stability in response to economic indicators. Recent Japanese economic data has shown some improvement, with the manufacturing PMI increasing to 49.8 from 49.5, approaching the crucial threshold of 50.0 that distinguishes contraction from expansion. This positive development indicates a potential stabilization in the manufacturing sector.
Technical Analysis of USD/JPY
Analyzing the H4 chart, there has been a recent corrective move up to 147.20, followed by a downward wave targeting 144.11. If this level is reached, a corrective movement to 145.66 could occur, testing it from below. The possibility of a further decline to 144.11 is on the table, with a potential continuation down to 141.80 and reaching 137.77. This bearish perspective is reinforced by the MACD indicator, where the signal line is above zero but trending sharply downward. Looking at the H1 chart, USD/JPY experienced a downward impulse to 145.66 and has since been consolidating around this level. A break below the consolidation range could signal the continuation of the downward trend towards 144.11, followed by a potential retest of 145.66. These indications align with the readings from the Stochastic oscillator, where the signal line is slightly above 50 but signals a downward movement.