JPY Analysis 08.10.2019

The US dollar fluctuated in a narrow bullish range during the Asian session against the Japanese yen following the developments and economic data that followed on Tuesday on the Japanese economy and on the eve of developments and economic data expected on Tuesday by the US economy, the largest economy in the world, including the speech of the Federal Reserve Governor Jerome Powell.

At 05:52 AM GMT, the USDJPY rose 0.15% to 107.42 levels from 107.26 opening levels, after hitting a session high of 107.44, and a low of 107.21.

The Japanese economy followed the release of the annual Household Expenditure Index which showed growth accelerated to 1.0% vs. 0.8% in July's annual reading, surpassing expectations for an acceleration of growth to 0.9%. The annual average wage index shrank to 0.2%, in line with expectations, versus 1.0% in the prior July reading.

We also followed the third largest economy in the world with the release of the current account reading which showed the surplus widened to 1.72 trillion yen from 1.65 trillion yen in July, beating expectations for a widening surplus to 1.68 trillion yen, while the seasonally adjusted reading showed The index also widened the surplus to 2.16 trillion yen from 2.00 trillion yen in July, also beating expectations of 2.07 trillion yen.

The Japanese Cabinet Office revealed that the ECW watchers survey of current and future conditions showed that the contraction shrank to 46.7 from 42.8 in August, beating expectations for a contraction to 43.3, while the future reading showed a widening contraction. To 36.9 vs. 39.7 in August, worse than expectations at 38.7.

On the other hand, investors are currently awaiting the US economy to reveal the PPI reading, which is a preliminary indicator of inflationary pressures that may reflect the stability of growth at 0.1%, little changed from August, while the core reading of the index itself may show a slowdown. The pace of growth to 0.3% vs. 0.2%, and the annual reading of the same index may show stability of growth at 1.8%.

In the same context, the core annual PPI reading may reflect a stable growth rate of 2.3%, little changed from the previous annual reading in August, before we see the FOMC member and Chicago Fed Chairman Charles. Evans at the Chicago Rotary Lunch.

Federal Reserve Governor Jerome Powell delivered a speech titled "A Look from the Federal Reserve" at the annual meeting of the National Association of Business Economics in Denver, hours after Powell expressed the importance of the Fed's independence away from politics, and before his participation tomorrow. In a panel discussion the Federal Reserve listens in Kansas City.

Markets are also looking forward to the release of the minutes of the FOMC meeting held on 17-18 September, in which it was approved to cut the federal funds rate for the second time in a row by 25 basis points to between 1.75% and 2.00%. This was in line with expectations, with the then disclosure of the Committee's expectations on growth rates, inflation and unemployment in addition to the future of interest rates for the next three years.

Technical Analysis

USDJPY traded positively yesterday to breach the 107.20 level, and is now approaching the pivotal resistance of 107.70, which requires attention from the upcoming trades, as a breach of this level will stop the negative scenario suggested in our recent reports and lead the price to achieve further gains in the intraday and short term.

The current stochastic negativity supports the chances of resuming the negative trading to break 107.20 then 106.70 and open the way for achieving the targets of the suggested bearish wave, which starts at 106.06 and extends to 105.50.

Expected trading range for today is between 106.50 support and 108.00 resistance.

Expected trend for today: Bearish.