The USD/JPY pair has experienced a slight increase, reaching 145.95 on Wednesday morning. This upward movement signals a rebound from two-week lows, however, it is too early to deem it a significant reversal in the trend given the current economic climate.
Market participants are exercising caution as they await the release of crucial US employment market data for August later this week. The upcoming figures are anticipated to have a substantial impact on the Federal Reserve’s future decisions regarding monetary policy.
Bank of Japan Policy Stance
On the Japanese front, the Bank of Japan (BoJ) has chosen to uphold its current policy stance. However, they have indicated potential adjustments in line with economic projections. The central bank’s cautious yet responsive approach, including the possibility of a December interest rate hike, underscores its commitment to stability amid ongoing economic indicators.
Positive Developments in Japanese Economy
Recent economic data from Japan has displayed signs of improvement, with the manufacturing PMI edging up to 49.8 from 49.5. This near reaching of the crucial 50.0 threshold, which distinguishes contraction from expansion, suggests a potential stabilization in the manufacturing sector.
Analyzing the technical aspects of the USD/JPY pair, the H4 chart highlights a recent corrective move up to 147.20, followed by a downward wave targeting 144.11. If this level is breached, a corrective movement to 145.66 could ensue, potentially leading to a further decline to 144.11, and down to 141.80 and 137.77. This bearish outlook is supported by the MACD indicator, with the signal line positioned above zero but trending downwards sharply.
On the H1 chart, USD/JPY executed a downward impulse to 145.66 and has since been consolidating at this level. A break below the consolidation range could trigger a continuation of the downward trend towards 144.11. Subsequently, a retest of 145.66 may be expected. This bearish scenario is echoed by the Stochastic oscillator’s readings, where the signal line hovers just above 50 but indicates a downward trajectory.