USDJPY Driven by Japanese Fundamentals with Target at 142.00

• Bullish Corrective Scenario: Buy positions above 143.50 with a take profit (TP) at 144.00 or an extended target at 145.00, from where selling opportunities may resume.
• Bearish Scenario: Sell positions below 142.89 with a TP at 142.00, 141.74, and an extended target at 141.00.
• Bearish Pullback Scenario: Sell positions below 144.00 or 145.00 (where a confirmed entry point occurs) with a TP at 143.00 and an extended target at 142.00 in the short term.

Fundamental Analysis

Key Insights:

• Shigeru Ishiba’s victory in the Japanese elections and signals from BoJ policy are impacting USDJPY.
• The yen strengthens due to speculation over potential adjustments in Japanese monetary policy.
• The Fed’s dovish rhetoric could continue weakening the USD.

The Japanese yen strengthened against the dollar after Shigeru Ishiba won the LDP leadership election to become Japan’s prime minister, raising expectations for more active economic policies. Additionally, Tokyo’s Consumer Price Index (CPI) showed a 2.0% year-over-year increase in September, down from 2.6% in August, which could influence future adjustments by the Bank of Japan (BoJ).

The BoJ minutes revealed debates among officials on the speed at which interest rates should rise, reflecting the growing concern about the timing of future monetary policy adjustments.

Meanwhile, the USD faced bearish pressure following dovish remarks from Federal Reserve members. Governor Lisa Cook highlighted the need to consider “downside risks” to employment, suggesting potential rate cuts.

Technical Analysis

USDJPY, H2

• Supply Zones (Selling): 145.08 and 145.89
• Demand Zones (Buying): 143.13, 142.00, and 140.60

The weekly bearish trend shows signs of continuation after the last two weeks’ corrective rally fell short of the August resistance, accelerating the decline after recent Japanese fundamentals.

The recent drop below the last validated support at 144.11 highlights yen recovery. After reaching the demand zone around 143.30, a pullback towards the broken support (now resistance) at 144.11 or a more extended supply zone around 145.00 is expected, from where selling can resume.

A bearish continuation and trend reversal will be confirmed if prices break below the demand zone around 143.30 and the support at 142.89, with a target in the coming days at the next demand zone around 142.00.

This bearish scenario will be invalidated if prices decisively break above the supply zone around 145.00, rising to challenge the resistance zone between 146.00 and 146.50, reversing the bearish momentum and preparing for a potential upward push toward the macro resistance at 147.17.