Yen Gains as Dollar Rally Pauses

Fundamental Analysis

* Greenback Pause: The USD/JPY has come under selling pressure as the U.S. dollar pulled back after a period of notable gains. In Japan, the National Core CPI, excluding volatile food and energy prices, rose to 2.1% in September, up from 2% in August. This increase in inflation has strengthened expectations that the Bank of Japan (BoJ) could raise interest rates later this year. Meanwhile, the U.S. dollar’s outlook remains solid, with investors expecting the Federal Reserve to adopt a gradual approach to cutting rates. Traders have dismissed the chance of a large rate cut in November, as positive U.S. economic data continues to reflect strength. The CME FedWatch tool shows 30-day Federal Funds futures are pricing in a total of 50 basis points in rate cuts by year-end, with 25 bps reductions expected in both November and December.

Technical Analysis

* Technical Breakout: : USDJPY was traded lower following prior breakout below the previous support level 149.550. MACD which illustrate ongoing bearish momentum signal suggest the pair to likely further extend its losses.

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards the level 146.950. Conversely, a potential reversal is also to be expected and the price could head back towards 152.550 after its breach back above the level 149.550.

Potential Risks

Looking ahead, investors will shift their focus to crucial U.S. data this week, including Manufacturing PMI, Services PMI, and Durable Goods Orders, while Japan faces a lack of significant data releases

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Monitoring

Stay updated on US and Japan data, central bank updates and any shifts in the US Dollar’s strength by following PU Xtrader’s financial news page.

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