USD/JPY Analysis Today 10/9: JPY Weak As USD Gains (Chart)

(MENAFN- Daily Forex)

• At the beginning of this week, the Japanese yen declined to 143.79 against the US dollar, cutting short a recent upward trend as the US dollar gained some ground amid continued uncertainty about the extent of the expected interest rate cut by the Federal Reserve later this month.
• The latest monthly US jobs report did not provide much clarity on the path of interest rates, while traders await key US inflation data this week.
• At the same time, the Japanese yen rose by about 3% last week and reached its highest level since the beginning of the year amid bets that the Bank of Japan will raise interest rates further amid strong growth, rising wages, and continued inflationary pressures.

Analogously, bank of Japan policymakers indicated that they would adjust monetary settings further if their economic and price outlooks materialize. On the economic data front, final figures showed that Japan's economy grew at an annual rate of 2.9% in the second quarter, below the previous figure of 3.1% and market expectations of 3.2%.

According to stock trading platforms, Japan's Nikkei Index falls to its lowest level in a month. According to trading, the Nikkei 225 index of Japanese shares fell by 0.48% to close at 36,216 points, while the broader TOPIX index lost 0.68% to close at 2,580 points on Monday, settling at its lowest levels in more than three weeks, as technology stocks led the decline. Consequently, Japanese stocks followed a sharp sell-off in Wall Street markets on Friday as weak US jobs data raised concerns about the health of the world's largest economy.

Meanwhile, final data showed that Japan's economy grew at an annual rate of 2.9% in the second quarter, below the previous figure of 3.1% and the consensus forecast of 3.2%. However, strong growth, rising wages and persistent inflationary pressures continue to support bets that the Bank of Japan will raise interest rates further. According to trading platforms, losses in technology stocks were led by Tokyo Electron (-2.3%), Disco Corp (-3.1%) and Renesas Electronics (-3.1%). Other major constituents in the index also posted notable declines, including Mitsubishi Heavy Industries (-2.3%), Mitsubishi UFJ (-2.3%) and Toyota Motor (-3.2%).

Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money USD/JPY Technical Analysis and Expectations Today:

USD/JPY has been trending lower in the past few days, but support around 142.00 appears to be holding. A pullback to Fibonacci levels close to here could follow. Meanwhile, the 38.2% Fibonacci retracement level is at 143.88, followed by the 50% level at 144.51. also, the larger correction could reach the 61.8% level at 145.15 near the downtrend line that has held since August and the 100 SMA resistance.

As for the moving averages, the 100 SMA is below the 200 SMA suggesting that the stronger resistance path is to the downside or that the sell-off is likely to gain more strength than a reversal. However, the gap between the indicators is narrowing to reflect the weakening downward pressure and a potential bullish crossover. If the latter happens, the USD/JPY pair could attempt to break above the trend line and go for a reversal on the downside. Stochastic is after all signalling oversold conditions, and is turning higher to reflect the recovery of bullish momentum. Similarly, the RSI is moving higher, so the price could follow suit as bulls regain control. Both oscillators have plenty of room to run before signalling exhaustion among buyers.

Overall, the USD/JPY pair is likely to take cues from this week's US inflation reports, especially the CPI release which could feature a decline in annual inflation. A weaker-than-expected result could increase the chances of a 0.5% Fed rate cut in September, which could drag the dollar lower further. On the other hand, strong data could dampen hopes of a Fed rate cut, which could lift the greenback. Nevertheless, it is worth noting that data out of Japan was mostly positive last week while the Bank of Japan's rhetoric turned hawkish, which led to strong gains for the JPY. Finally, there are no major reports out of Japan this week.

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