This week's USD/JPY is expected to develop around whether it breaks above ¥158.40 or falls below ¥156.60, with US indicators such as the ISM manufacturing and non-manufacturing indexes and the US employment report serving as catalysts. The pair's direction will depend on the Bank of Japan's stance and movements in US interest rates.
USD/JPY rose to ¥158.344 last week before losing momentum and closing at ¥157.531. This week, ahead of Japanese and US economic data releases, the market is expected to test whether the pair will break above ¥158.40 or fall below ¥156.60. Net yen buying has exceeded 100,000 contracts, while trading has lacked continuity and direction.
With the Bank of Japan's October policy meeting having left rates unchanged while the possibility of an additional rate hike remains, the outlook for US interest rates in November and movements in US equities are expected to affect the direction of USD/JPY. The market is moving with both stronger expectations for a Bank of Japan rate hike and expectations of US rate cuts in focus. CFTC yen futures show an increase in net long positions, indicating an accumulation of yen-buying positions.
The focus this week is on the ISM indexes and the US employment report. If US rates rise again while share prices remain stable, this could provide momentum for a break above ¥158.40. Conversely, if weaker employment coincides with lower US rates and falling share prices, the market is expected to be alert to a break below ¥156.60. Higher oil prices and inflationary pressure, as well as developments in the Middle East, could also affect volatility.
Technically, the 25-day moving average is at ¥157.881 and the 200-day moving average is at ¥158.573. Whether the pair can move above around ¥157.90 will determine whether an uptrend begins. Based on the inflection points indicated by these and other indicators, this week's forecast range is ¥155.80-¥159.20, with a central range of ¥156.65-¥158.35.