USD/JPY Forecast: RSI Continues to Flirt with Overbought Zone

US Dollar Outlook: USD/JPY

USD/JPY pulls back ahead of the weekly high (153.88) as the US Job Openings and Labor Turnover Survey (JOLTS) warns of a weakening labor market, but the Relative Strength Index (RSI) may show the bullish momentum gathering pace as it continues to flirt with overbought territory.

USD/JPY Forecast: RSI Continues to Flirt with Overbought Zone

USD/JPY struggles to extend the recent series of higher highs and lows as the gauge for US job openings narrows to 7.443M in September from a revised 7.861M the month prior to mark the lowest reading since January 2021.

The development may keep the Federal Reserve on track to further unwind its restrictive policy as ‘reducing restraint too slowly could unduly weaken economic activity and employment,’ and the update to the Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred gauge for inflation, may also influence USD/JPY as both the headline and core rate are seen narrowing in September.

US Economic Calendar

Additional evidence of slowing price growth may drag on the US Dollar as it encourages the Federal Open Market Committee (FOMC) to achieve a neutral stance sooner rather than later, but a higher-than-expected PCE print may keep USD/JPY afloat as it curbs speculation for another 50bp rate cut.

With that said, a further advance in USD/JPY may push the RSI above 70 as it holds around its highest level since July, but lack of momentum to extend the recent series of higher highs and lows in the exchange rate may keep the oscillator out of overbought territory.

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

USD/JPY trades near the weekly high (153.88) as it stages a three-day rally, with a close above 153.80 (23.6% Fibonacci retracement) bringing 156.50 (78.6% Fibonacci extension) on the radar.
Next area of interest comes in around the 1990 high (160.40) but another failed attempt to close above 153.80 (23.6% Fibonacci retracement) may push USD/JPY back towards the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone.
A break/close below the 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension) region opens up the monthly low (142.97), with the next area of interest coming in around 140.50 (61.8% Fibonacci retracement) to 141.50 (38.2% Fibonacci extension).

Additional Market Outlooks

Monetary vs Fiscal Policy: Implications for FX Markets

USD/CAD Eyes August High as RSI Holds in Overbought Territory

AUD/USD Vulnerable amid Failure to Defend September Low

Gold Price Forecast: RSI Falls Back from Overbought Zone

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.