The USD/JPY pair has slightly increased, rising to 145.95 on Wednesday morning. This movement marks a rebound from two-week lows, though it is still early to suggest a significant reversal in the trend due to the ongoing economic climate.
Market participants are cautious as they await crucial US employment market data for August, which is due later this week. These figures will likely substantially impact the Federal Reserve's forthcoming decisions.
On the Japanese front, the Bank of Japan (BoJ) has maintained its current policy stance but has signalled potential adjustments should economic projections align with actual outcomes. This cautious but responsive approach, including the possibility of a December interest rate hike, reflects the BoJ's commitment to stability in the face of economic indicators.
Recent Japanese economic data has shown a slight improvement, with the manufacturing PMI inching up to 49.8 from 49.5, nearly reaching the critical threshold of 50.0 that differentiates contraction from expansion. This positive development suggests a potential stabilisation in the manufacturing sector, which could influence the USD/JPY forecast as market participants assess the implications for monetary policy and economic growth in Japan.
USD/JPY technical analysis
The H4 chart indicates a recent corrective move up to 147.20, followed by a downward wave targeting 144.11. Should this level be reached, a corrective movement to 145.66 could occur, testing it from below. A further decline to 144.11 is conceivable, with a potential continuation to 141.80 and down to 137.77. This bearish outlook is supported by the MACD indicator, with the signal line positioned above zero but trending downward sharply.
On the H1 chart, USD/JPY executed a downward impulse to 145.66 and has since been consolidating around this level. A break below the consolidation range could initiate the continuation of the downward trend towards 144.11. After reaching this target, a retest of 145.66 may be anticipated. This bearish scenario aligns with the Stochastic oscillator's readings, where the signal line is just above 50 but indicates a downward movement.
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