USD/JPY Analysis: bullish potential toward 109.31
|USD/JPY Current Price: 108.45
- Fed’s hawkish statement pushed USD/JPY to fresh multi-week highs.
- Bank of Japan seen on hold in regards to monetary policy.
- USD/JPY poised to extend its gains according to intraday readings.
The USD/JPY pair traded muted in the 108.10/20 region ahead of the Fed’s decision, ignoring the decline in government bond yields and the sour tone of equities. Japanese data released at the beginning of the day seemed encouraging, but it has a mixed message, reflecting how the trade war is affecting the local economy. Japan’s Merchandise Trade Balance Total posted a deficit of ¥-136.3B, much better than the expected ¥-355.9B and the previous ¥-250.7B. The improvement was a result of collapsing imports, down by 12% in the month from -1.2% in July. Exports, on the other hand, contracted by less-than-anticipated, falling by 8.2%. Fed’s hawkish announcement weighed on equities but helped government bond yields recover the ground lost, giving the pair a boost.
Bank of Japan coming next
During the upcoming Asian session the Bank of Japan will have its monetary policy meeting, although Japanese policymakers are expected to remain on hold, as policymakers will likely wait for the market to finish digesting Fed’s announcement and trade war developments before deciding next move, which most believe, will be adding to the current massive stimulus. Should the central bank act this Thursday, the market will be caught off-guard, therefore resulting in wide movements in Yen crosses.
USD/JPY short-term technical outlook
The USD/JPY pair is heading into the Asian opening at fresh multi-week highs in the 108.40 region, bullish according to technical readings in the 4 hours chart, as it’s moving sharply above its 20 SMA, after repeatedly bouncing from the indicator in the last sessions. Technical indicators in the mentioned chart have resumed their advances within positive levels, reaching fresh weekly highs, favoring an upward extension toward August high at 109.31.
Support levels: 108.20 107.90 107.45
Resistance levels: 108.60 108.90 109.30
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