Technical analysis of USD/JPY

The attached chart shows that the US dollar continues to trade sideways against the Japanese yen, between the 152 level as a support zone and levels near 163 as a resistance zone. This horizontal range has been in place since October last year, with several previous rebounds occurring around these levels.

The following factors further highlight the importance of this range:

  1. Price action continues to move between the 20-week and 100-day moving averages.
  2. The 152–163 range also falls within the positive zone of the currency pair's overall price movement over the past three years.
  3. A break above the nearby resistance around 160 could pave the way for prices to test the more significant resistance near 163.
USDJPY, Time frame: 1W, Tools: SMA 20 + 100USDJPY, Time frame: 1W, Tools: SMA 20 + 100

Fundamental Analysis of USD/JPY

With the US Dollar Index rising by approximately 0.6% so far in October and around 2% in September, and reaching its highest levels in 18 months, continued pressure on the yen against the US dollar is expected. 

The following key factors should be monitored in the coming period:

  1. Bank of Japan meeting: Scheduled for next Friday, with expectations that interest rates will remain unchanged at 1.25%, following two rate hikes this year.
  2. Federal Reserve meeting: Scheduled for tomorrow, Wednesday, with expectations that interest rates will remain unchanged at 4.0%, following one rate hike this year.
  3. Rising oil prices and shipping costs: These are key factors putting significant pressure on the Japanese economy.

Ultimately, the key question is: How much further could the yen weaken against the US dollar despite ongoing efforts to defend the currency?