USDJPY Outlook: Bearish Pressures Amplified

Key Events

ADP Non-Farm Employment Change
Unemployment Claims
US ISM Services PMI Non-Farm Payrolls (Friday)
FOMC Member Remarks (Friday)

The USDJPY chart is hovering near its 2024 lows, with bearish risks amplified by increasing expectations for a 50bp rate cut in the US, coupled with a potential rate hike by the BOJ in September.

Recent data from the JOLTS Job Openings indicator, which provides an early glimpse into the labor market and economic activity, recorded a drop just above April 2021 lows. This has heightened concerns about the cooling labor market, especially as monetary policy effects typically lag. The upcoming Non-Farm Payroll reports on Friday are expected to clarify whether the US economy is headed for a soft or hard landing as the Fed prepares to initiate its easing cycle.

Following the Fed’s decision on September 18th, the BOJ will hold its policy meeting, amid growing concerns of another rate hike due to rising inflation in Japan. This potential rate hike, occurring alongside global monetary easing policies, heightens the risk of a significant market impact.

Technical Outlook

USDJPY Outlook: DXY – 3-Day Time Frame – Log Scale

Source: Tradingview

The US Dollar Index is navigating critical levels that could determine whether the trend favors a bullish reversal or continues its bearish trajectory. A bullish bias could emerge with a close back above the 102 barrier and inside the primary consolidation range.

Conversely, a close below the December 2023 lows would confirm a drop towards the July 2023 lows. The upcoming ISM Services PMI and US employment indicators are poised to play a decisive role in determining the trend direction, which will significantly impact the broader market.

USDJPY Outlook: USDJPY – 3 Day Time Frame – Log Scale

Source: Tradingview

In August, the USDJPY chart traced a contracting consolidation pattern, marked by lower highs and higher lows, printing the 2024 low at 141.70, aligned with the mid-level of the duplicated channel from the primary 2024 trend.

Current price action is showing signs of weakness against the yen, but final confirmation of a bearish trend requires a break below the 140-barrier. Should this occur, the bearish scenario points towards the 137 level, with risks of a sharper decline towards the 130-128 zone. On the upside, levels at 147.20 and 149.20 present short-term resistance for bullish corrections, while 152 and 154 could serve as longer-term resistance levels.

Key levels are being closely watched for a breakout, likely in alignment with upcoming monetary policy decisions. As the saying goes, "Don’t fight the Fed."

--- Written by Razan Hilal, CMT – on X: @Rh_waves

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.