USD/JPY outlook: Falls to one month low as sentiment sours further ahead

Slobodan Drvenica Windsor Brokers

USD/JPY

USDJPY continues to trend lower and hit new one-month low on Thursday, pressured by expectations of Fed rate cut, diverging policies of Fed and BoJ (US central bank is heading towards its first rate cut, while BoJ started its tightening cycle and with hawkish signals from top officials).

In addition, weak US labor data (today’s ADP report showed that private sector hiring dipped well below expectations in August, while JOLTS job openings report was slightly above consensus, but overall picture remains weak).

Yen was also boosted by safe haven buying on uncertain economic situation in the US and persisting geopolitical tensions.

Fresh leg lower generated negative signals on Wednesday’s return and close below falling 10DMA (144.77) and violation of supports at 143.50/44 (Fibo 76.4% of 141.68/149.40 / former higher low of Aug 26).

Close below these levels is needed to confirm signal and open way towards targets at 141.68 (Aug 5 spike low) and 140.48/25 (Fibo 61.8% of 127.22/161.95 / Dec 28 trough) in extension.

Markets shift their focus to the last but the most significant report from the US labor sector – Nonfarm payrolls (Aug 164K f/c vs 114K in July).

Another miss on Friday, although ADP report is not seen as indication for the NFP, would confirm signals that the US labor sector is slowing down, which would add to narrative about possible more aggressive action by the Fed and increase pressure on dollar.

Res: 143.90; 144.63; 144.77; 145.54.
Sup: 142.84; 141.68; 140.48; 140.25.

Interested in USD/JPY technicals? Check out the key levels

1. R3 146.81
2. R2 146.19
3. R1 144.96
PP 144.34
1. S1 143.11
2. S2 142.49
3. S3 141.26

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

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