USD/JPY: the upward impulse will remain

Current trend

In September USD considerably strengthened against yen due to the growth of investors’ interest to the US currency which caused the demand for low-risk assets, such as gold and yen, to go down. In the first part of September the pair rapidly grew and then moved to a flatter upper channel. The impulse for the growth of USD was positive data on economic growth rate and labor market as well as the Fed’s statements about further tightening of the monetary policy. At the same time, the Bank of Japan kept the monetary policy unchanged and supported a negative interest rate. In this situation the volume of carry trade positions has rapidly increased leading to the strengthening of the upward impulse. At the end of September the pair reached the level of 113.25 and consolidated near it waiting for key macroeconomic releases.

The main US releases are scheduled for the second half of the week. These include the data on the unemployment level, changes in nonfarm payrolls, and initial jobless claims.

Support and resistance

In the medium term positions of the US currency are expected to strengthen and yen — to reduce. This will improve the upward impulse and help the pair grow to this year’s maximums at 114.35, 114.50, 115.50. Technically the pair remains in the medium-term upward channel, and the next target level is located at 114.50 — the upper border of the tendency and a local maximum of mid-July 2017. Technical indicators confirm the growth forecast: MACD indicates the preservation of the bi volume of long positions, and the upper line of Bollinger Bands in the D1 chart is above 114.00 showing the next target level in the medium term.

Support levels: 112.40, 112.00, 111.50, 111.00, 110.50, 110.20, 109.55, 109.00, 108.15.

Resistance levels: 113.25, 113.45, 113.70, 114.00, 114.35, 114.50, 115.50.

Trading tips

In this situation long positions may be opened from the current level within the upward channel with target at 114.50 and stop-loss at 112.50.