Source: PaxForex Premium Analytics Portal, Fundamental Insight
The Japanese Corporate Service Price Index for August increased by 1.9% annualized. Economists predicted a rise of 2.4% annualized. Forex traders can compare this to the Japanese Corporate Service Price Index for July, which rose 2.0% annualized.
US Preliminary Durable Goods Orders for August are predicted to decrease by 0.4% monthly, and Durables Excluding Transportation to increase by 0.2% monthly. Forex traders can compare this to US Durable Goods Orders for July, which contracted 0.1% monthly, and Durables Excluding Transportation, which rose 0.2% monthly. Capital Goods Orders Non-Defense Excluding Aircraft for August are predicted to rise 0.2% monthly. Forex traders can compare this to Capital Goods Orders Non-Defense Excluding Aircraft for July, which increased 0.3% monthly.
The US S&P/Case-Shiller Composite 20 for July is predicted to increase 0.20% monthly and 17.00% annualized. Forex traders can compare this to the US S&P/Case-Shiller Composite 20 for June, which rose 0.40% monthly and 18.60% annualized.
US Consumer Confidence for September is predicted at 104.5. Forex traders can compare this to US Consumer Confidence for August, reported at 103.2. US New Home Sales for August are predicted at 500K new homes. Forex traders can compare this to US New Home Sales for July, reported at 511K new homes.
The interest rate differential between the Japanese Yen and the US Dollar widens, and traders may begin to use it as a carry trade, placing downside pressure on the Japanese currency. Another scenario to watch out for is the ongoing interest rate increases by the US Federal Reserve and the Forex interventions by the Bank of Japan, which began last week. The Japanese central bank is selling its US Treasury holdings to finance market interventions, and traders should focus on which central bank will run out of ammunition first. With the US in a recession, the US Fed could be forced to pause its campaign, while the Bank of Japan has plenty of US securities to dump.
The forecast for the USD/JPY remains bearish as this currency pair faces a major horizontal resistance area. Confirming the absence of short-term bullishness are the flat Kijun-sen and Tenkan-sen. Adding to the bearish outlook is the Ichimoku Kinko Hyo Cloud, which shows signs of exhaustion after the Senkou Span B has flatlined, but volatility could increase due to the ascending Senkou Span A. Traders should monitor the CCI after it has reached extreme overbought territory, where it appears to form a lower high. A breakdown below 100 could trigger the next correction in this currency pair. Can bears regain control of price action and pressure the USD/JPY into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the USDJPY remain inside the or breakdown below the 143.100 to 145.000 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 144.500
- Take Profit Zone: 137.700 – 139.400
- Stop Loss Level: 145.900
Should price action for the USDJPY breakout above 145.000, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 145.900
- Take Profit Zone: 147.350 – 148.850
- Stop Loss Level: 145.000
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