USD/JPY Analysis: Bearish Momentum & Trading Strategy
The Japanese Yen weakens despite a soft US Dollar as markets await Fed Chair Powell’s upcoming speech
FUNDAMENTAL OVERVIEW:
- The Japanese Yen faces pressure as incoming Prime Minister Shigeru Ishiba emphasizes the need for continued accommodative monetary policy.
- Japan’s Retail Trade grew by 2.8% year-on-year in August, exceeding the forecasted 2.3%.
- Meanwhile, August’s US Core PCE Price Index has strengthened the likelihood of an aggressive Fed rate-cutting cycle.
The Japanese Yen (JPY) weakened against the US Dollar (USD) on Monday after dovish remarks from Japan’s incoming Prime Minister, former Defense Chief Shigeru Ishiba. On Sunday, according to The Japan Times, Ishiba emphasized the need for an accommodative monetary policy, highlighting the importance of keeping borrowing costs low to support Japan’s fragile economic recovery.
Japan’s Retail Trade grew by 2.8% year-on-year in August, exceeding market expectations of 2.3% and marginally surpassing the revised 2.7% increase from the previous month. Seasonally adjusted Retail Trade rose by 0.8% on a month-over-month basis, marking the largest gain in three months, following a 0.2% rise in July.
The US Dollar faced downward pressure after Friday’s release of the US Core Personal Consumption Expenditures (PCE) Price Index for August, which aligns with the Federal Reserve’s inflation outlook. This data has strengthened the likelihood of an aggressive rate-cutting cycle by the central bank.
Traders are expected to turn their attention to Federal Reserve Chair Jerome Powell’s speech on Monday.
USD/JPY TECHNICAL ANALYSIS DAILY CHART:
Technical Overview:
USD/JPY is trading within a down channel.
USD/JPY is moving below 10&20 Moving Averages (SMA).
The Relative Strength Index (RSI) is in the Selling Zone, while the Stochastic oscillator suggests a Neutral trend.
Immediate Resistance level: 143.12
Immediate support level: 141.66
HOW TO TRADE USD/JPY
USD/JPY experienced a sharp drop, followed by a temporary bounce. However, a bearish engulfing pattern signaled a renewed decline. The pair could briefly test higher levels before resuming its downward momentum.