USD/JPY Return to 145 Hinged on US Inflation Numbers and Fed Chatter

It was a busy start to the Asian session for the USD/JPY pair, with employment, retail sales, and industrial production numbers from Japan in focus.

The numbers were Yen positive.

In August, Japan’s unemployment rate fell from 2.6% to 2.5%, which was in line with forecasts. The jobs/applications rate increased from 1.29 to 1.32, also Yen positive. Retail sales surged by 4.1% versus a forecasted 2.8%. In July, retail sales rose by 2.4%.

Industrial production jumped by 2.7% in August versus a forecasted 0.2% rise. In July, production increased by 0.8%.

According to the Ministry of Economy, Trade, and Industry,

Industries that mainly contributed to the increase were

• Production machinery
• Iron, steel, and non-ferrous metals
• Chemicals (excl. Inorganic, organic chemicals, and medicine).

Industries that mainly contributed to the decrease were,

• Electronic parts and devices
• Motor vehicles
• Inorganic and organic chemicals.

Forecasts were also Yen positive, with production for September seeing an upward revision from 2.9% to 3.2%.

Later this morning, private sector PMI numbers from China and consumer confidence figures from Japan will also influence ahead US inflation number late in the day.

USD/JPY Price Action

This morning, the Dollar/Yen was up 0.02% to 144.436. A mixed start to the day saw the Dollar/Yen fall to an early low of 144.304 before finding support.

Technical Indicators

The Dollar/Yen will need to avoid the 144.420 pivot to target the First Major Resistance Level (R1) at 144.794 and the Thursday high of 144.812. While today’s stats from China will provide direction, US inflation and FOMC member chatter will need to be dollar friendly to support a breakout.

In the case of a breakout session, the Dollar/Yen would likely test resistance at 145 and the Second Major Resistance Level (R2) at 145.186.

The Third Major Resistance Level (R3) sits at 145.952.

A fall through the pivot would bring the First Major Support Level (S1) at 144.028 into play. However, barring a dollar meltdown, the Dollar/Yen would likely avoid sub-144 and the Second Major Support Level (S2) at 143.654.

The Third Major Support Level (S3) sits at 142.888.

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 143.949. 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 (143.949) would support a breakout from R1 (144.794) to target 145 and R2 (145.186). However, a fall through S1 (144.028) and the 50-day EMA (143.949) would give the bears a look at S2 (143.654). The 200-day EMA sits at 141.252.