- The markets in Japan reopen after the Mountain Day holiday with plenty for investors to respond to.
- After the US CPI and PPI numbers, bets on a September Fed rate hike cooled despite sticky inflation, leaving Fed chatter to influence.
- The near-term technical indicators are bullish, signaling a return to 145.
On Friday, the USD/JPY rose by 0.15% to wrap up the day at 144.932. Producer price index numbers from the US extended the winning streak to five sessions.
This morning, there are no economic indicators from Japan or China to draw interest after the Friday holiday in Japan. The lack of economic indicators will leave investors to respond further to the US PPI Report and look ahead to the US retail sales figures on Tuesday and the FOMC meeting minutes on Wednesday.
With the Bank of Japan in ultra-loose mode, the US retail sales figures and FOMC meeting minutes could shift bets on a September Fed rate hike.
The US Session
It is a quiet US session, with no economic indicators to influence. The lack of US economic indicators will leave the USD/JPY in the hands of Fed chatter.
While no FOMC members are on the calendar to speak today, commentary with the media will move the dial. Despite sticky core inflation, the probability of the Fed standing pat in September increased from 87.0% to 90.0% last week. According to the CME FedWatch Tool, the chance of a 25-basis point September rate hike was just 10.0%. Hawkish chatter should move the dial.
USD/JPY Price Action
The Daily Chart showed the USD/JPY hover at the upper level of the 144.3 – 145.0 resistance band. After the bullish Friday session, the USD/JPY remained above 50-day (141.201) and 200-day (137.407) EMAs, sending bullish near and longer-term price signals.
Notably, the 50-day EMA pulled further away from the 200-day EMA, signaling further price gains.
Looking at the 14-Daily RSI, the 65.09 reflects bullish sentiment, supporting a breakout from the 144.3 – 145.0 resistance band to target 146. However, a USD/JPY fall through the 144.3 – 145.0 resistance band would give the bears a look at sub-143.
Looking at the 4-Hourly Chart, the USD/JPY faces strong resistance at 145. The USD/JPY sits at the upper level of the 144.3 – 145.0 resistance band and above the 50-day (143.271) and 200-day (141.797) EMAs, sending bullish near and longer-term price signals.
Significantly, the 50-day EMA pulled away from the 200-day EMA, signaling further gains.
A hold above the lower level of the 144.3 – 145.0 resistance band and the 50-day EMA would support a breakout from 145 to target 146. However, a fall 144.3 – 145.0 resistance band would bring the 50-day EMA (143.271) into play.
The 14-4H RSI reading of 72.60 shows the USD/JPY in overbought territory, with buying pressure outweighing selling pressure. However, the RSI aligns with the 50-day EMA, supporting a breakout from the 144.3 – 145.0 resistance band to target 146.