USD/JPY sits between the threat of Japanese intervention and expectations for US Federal Reserve rates. Tokyo's warnings keep the pair below 159.00, while low odds of an October Fed hike limit the yen's upside.
Japan's Finance Minister said Tokyo and Washington have kept a united stance since their joint intervention in July and are ready to act again without hesitation if necessary. The remarks came as USD/JPY fell after the release of US inflation data before it began to recover.
The market views 160.00 as a red line, so approaching it triggers profit-taking and yen strengthening. Japan's hawkish rhetoric is keeping USD/JPY from rising above 159.00.
Fed hike odds stay low despite hotter inflation
US CPI rose to 3.7% in September, above forecasts. Even so, the market does not expect an immediate rate hike at the October meeting, and the probability is estimated at around 40% or less because Fed officials have made it clear there is no need to rush.
The BoJ, meanwhile, is opposed to another rate hike at its October meeting. Markets are pricing in a December hike at around 88-90%. Low expectations of an October Fed hike are preventing the yen from strengthening much further.
Chart levels: 157.57 support, 158.28 first target
On the H4 chart, USD/JPY reached resistance at 158.91 before a corrective decline began. The price returned to 157.57, which previously acted as the centre of consolidation and is now considered the main support.
The main scenario expects the correction to finish, followed by a new upward wave towards resistance at 158.28. A close above that level would open the way for a retest of 158.91 and a further move towards 160.06. The MACD is in positive territory, but its shrinking histogram suggests weakening upward momentum.
Consolidation below 157.57 would invalidate the main scenario and create conditions for a decline towards support at 157.24 and then 156.47. US PPI data due today could data due today could give the pair its next push.
Source: ActionForex
Trading involves risk.
Risk Disclaimer
