USDJPY Analysis: Preparing for September Policies

Key Events Today:

• Tokyo Core CPI Rises to 2.4%: Marking the fourth consecutive increase
• European Flash CPI Estimate: Matches the expected inflation drop to 2.2%
• US Core PCE: Waited for insights into the upcoming September monetary policies

Next Week:

• US Bank Holiday (Monday): Irregular volatility is expected
• US ISM Manufacturing PMI (Tuesday): A leading economic indicator
• US JOLTS Job Openings (Wednesday): A key indicator of overall employment
• ADP Non-Farm Employment Change (Thursday): Provides an early look at employment trends
• ISM Services PMI (Thursday): A leading indicator, challenging current inflation rate trends
• US Non-Farm Payrolls (Friday): A critical indicator of economic activity
• FOMC Member Williams' Statement (Friday)

The long-anticipated Fed rate cut for 2024 is near, with upcoming employment indicators set to play a crucial role in determining its magnitude, alongside today’s US Core PCE data. From the Yen’s perspective, Tokyo’s Core CPI surpassing the central bank’s target could set a hawkish tone for the BOJ at its September policy meeting. With both Dovish US and Hawkish Japanese policies in focus, the USDJPY may face increased bearish pressures.

Next week’s US data is expected to bring high volatility to the US Dollar, with leading economic indicators and non-farm payrolls data culminating in key remarks from Fed member Williams.

Technical Outlook

USDJPY Analysis: USDJPY – Weekly Time Frame – Log Scale

Source: Tradingview

On a weekly time frame, the chart continues to respect the support established by the Dragonfly Doji pattern, which aligns with the Relative Strength Index (RSI) retesting levels from January 2023. The key support levels remain near the extremes of the pattern, between 141.70 and 140, before potentially targeting the July 2023 low at the 137 zone.

On the upside, the trendline connecting consecutive higher lows from January, March, and December 2023 serves as the resistance and a critical barrier between the chart’s downtrend and any potential continuation of an uptrend.

A bullish trend could emerge if the price closes above the 150-barrier, with expected levels at 152 and 154. Given the trajectory of upcoming monetary policies from the Fed and BOJ, bearish dominance currently appears on the chart. However, this could shift if upcoming data supports a bullish reversal, confirming the presence of the Dragonfly Doji pattern.

--- Written by Razan Hilal, CMT – on X: @Rh_waves