USD/JPY Buyers Struggle to Maintain Market Control

Market Overview:

The U.S. dollar displayed mixed movements early Wednesday as investors awaited key economic data. While its gains against the euro paused, the dollar advanced against the Japanese yen. This divergence in performance can be attributed to expectations surrounding U.S. economic indicators, particularly the ADP private payroll report for September, which could provide clues on the Federal Reserve’s next policy steps.

Conversely, the yen remained under pressure after the Bank of Japan (BoJ) signaled caution about the risks facing Japan’s economy, refraining from reaffirming any immediate commitment to rate hikes. This dovish stance, coupled with ongoing global uncertainty, has weighed on the yen’s appeal as a safe-haven currency.

Technical Outlook:

In the four-hour chart, USD/JPY shows a bullish bias following a corrective dip to the solid support level at 141.637. The pair has successfully held above key moving averages and recently breached its daily high at 144.528. This breakout reinforces the bullish momentum, suggesting further upside potential if buyers can maintain control above this level.

Immediate targets for the bulls lie at 145.176, 145.495, and 146.093, with an extended rally eyeing the higher resistance at 146.741. Momentum indicators, including RSI and MACD, confirm the ongoing upward pressure, supporting a continuation of the trend.

Alternative Scenario:

If buyers fail to sustain the breakout above 144.528, a retracement is likely, bringing supports at 143.746 and 142.963 into focus. A break below these levels could shift momentum back in favor of the sellers, negating the short-term bullish outlook.

Key Levels Overview:

• Resistance Levels:
  • Resistance 1: 145.176
  • Resistance 2: 145.495
  • Resistance 3: 146.093
  • Resistance 4: 146.741
• Current Price: 144.600
• Support Levels:
  • Support 1: 144.528
  • Support 2: 143.746
  • Support 3: 142.963

Key Events to Watch:

Market participants are focused on the upcoming U.S. ADP private payroll data, expected to provide a glimpse into the health of the labor market ahead of Friday’s highly anticipated non-farm payrolls (NFP) report. Any significant slowdown in U.S. job growth could temper expectations for future interest rate hikes, potentially weighing on the dollar.

Additionally, Bank of Japan Governor Kazuo Ueda’s recent comments reinforced the BoJ’s cautious approach, emphasizing the risks to Japan’s economic recovery rather than hinting at tighter monetary policy. This dovish tone has contributed to the yen’s weakness, further driving USD/JPY higher.

Conclusion:

USD/JPY remains in an upward trajectory, bolstered by a weak yen and mixed sentiment around the U.S. dollar. A sustained break above 144.528 opens the door to higher resistance levels, with 145.176 being the next critical target for buyers. However, failure to hold this level could prompt a pullback toward 143.746 and below, shifting the near-term outlook. The upcoming ADP and NFP reports will be pivotal in shaping the pair’s next move.

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