USD/JPY Analysis – Correction Ahead of a Possible Jump to 116

Like I’ve been saying during my previous analyses, Job openings and employment surge is the FED’s one of the main goals. Even being so, the market seems to still hold on to the USD. The JOLTS Job openings report claimed only 10.439M new job openings, which is below the estimated 10.925M, which is a huge almost 500K gap. Nevertheless, USDJPY continued its massive bullish impulse reaching 113.787.

Technical analysis

Multi-time frame analysis of the pair suggests a possible upcoming correction down to 112.150 – 112.300 levels, where the US Dollar/Japanese Yen could create a great opportunity to a swing high of 114 and 116 as seen on a weekly chart below.

Despite the bullish looking USDJPY, the pair has to retest the February 20, 2020 resistance of 112.2 – 112.154 as support.

The importance of this support and current resistance is also rendered on a 4H USDJPY chart. The pair has hit the upper edge of the parallel channel and could head downwards to retest the lower band of the uptrend channel.

MACD and RSI on all of the three time-frames signal the local bearish move, however this bearish movement should be considered as a correction as the impulse is very strong and an important breakout is made on a daily chart.

The support zone at 112.154 – 112.3 outlined on the chart is also strongly backed by EMA50, which is widely used for swing price action. A retest of this zone will accumulate buyers power as this level also holds a resistance of September 20, 2021. And as a general rule, retesting a resistance as support is a bullish continuation signal.

The US Dollar index is still below its strong resistance and despite rising yields, DXY still remains below it. There still is a high probability of DXY to drop towards 92.4 levels to complete the expanding diagonal / broadening wedge pattern.

Upcoming events to track, to follow the price action of the pair are:

October 13, 2021 – US Core CPI data both monthly and annual. Whilst YoY data is forecasted to remain at 0.2, there is an expectation that MoM data will be 0.2, higher than August’s 0.1.

October 13, 2021 – OPEC Monthly report, key driver of the oil price, rising oil prices have an impact on the USD.

October 13, 2021 – FOMC meeting minutes. Important to trace as the FED might input changes to the report and might drop some interesting market-shaking comments.

October 14, 2021 – Japan’s industrial production for August will outline Japan’s key economic sector.

October 14, 2021 – US Initial Jobless Claims. Again, keeping an eye on the FED’s key metric.