This Morning’s USD/JPY Breakout Gives the Bulls Another Look at 146

It was a busy start to the Asian session for the USD/JPY pair, with the manufacturing sector PMI and Tankan survey-based numbers in focus.

The numbers were mixed.

In Q3,

• Tankan All Big Industry CAPEX rose by 21.5% versus 18.6% in Q2. Economists forecast an 18.8% increase.
• The Tankan Big Manufacturing Outlook Index slipped from 10 to 9 versus a forecast of 11.
• Tankan Large manufacturers Index fell from 9 to 8 versus a forecast of 11.
• The Tankan Large Non-Manufacturing Index rose from 13 to 14 versus a forecast of 13.

In September, the manufacturing PMI slipped from 51.5 to 50.8 versus a prelim 51.0.

According to the September survey,

• New orders fell at the most marked pace in two years, weighed by high prices and weak market conditions.
• There was also a fall in new orders from China, South Korea, Europe, and the US.
• Manufacturers cut production volumes for the third consecutive month.
• Despite the fall in new orders and production, firms continued to hire, with the rate of job creation hitting a 7-month high.
• A pickup in business optimism supported the increase in hiring.

Later today, the US manufacturing sector will also be in the spotlight. The all-important ISM Manufacturing PMI will have the most influence. Economists forecast the PMI to fall from 52.8 to 52.2. Price pressures and job creation will likely be the main areas of interest.

USD/JPY Price Action

This morning, the Dollar/Yen was up 0.13% to 144.900. A mixed start to the day saw the Dollar/Yen fall to an early low of 144.496 before rising to a high of 145.292.

The Dollar/Yen broke through the First Major Resistance Level (R1) at 144.951 and the Second Major Resistance Level (R2) at $145.183 before easing back.

Technical Indicators

The Dollar/Yen will need to avoid the 144.577 pivot to retarget the First Major Resistance Level (R1) at 144.951. Following today’s mixed numbers from Japan, US manufacturing stats and Fed chatter will be the key to a bullish US session.

In the case of a breakout session, the Dollar/Yen would likely retest the Second Major Resistance Level (R2) at 145.183 and resistance at the morning high of 145.292.

The Third Major Resistance Level (R3) sits at 145.789.

A fall through the pivot would bring the First Major Support Level (S1) at 144.345 into play. However, barring a dollar meltdown, the Dollar/Yen would likely avoid sub-144 and the Second Major Support Level (S2) at 143.971.

The Third Major Support Level (S3) sits at 143.365.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The Dollar/Yen sits above the 50-day EMA, currently at 144.129. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

Avoiding the 50-day EMA (143.129) would support a breakout from R1 (144.794) to retarget 145 and R2 (145.183). However, a fall through S1 (144.345) would give the bears a run at the 50-day EMA (144.129). The 200-day EMA sits at 141.484.