USD/JPY Analysis: Price Retreats from One-Month High

The USD/JPY chart shows that yesterday (3 October), the price slightly surpassed the 147.230 level, marking the highest point since 3 September.

This is significant as it indicates a new swing high, identified by the ZigZag indicator (in purple), which hasn’t been seen in months.

Bullish arguments for the USD/JPY chart today:

→ The price is within an ascending channel (shown in blue), illustrating an upward trajectory for the US dollar. This follows a period where the yen gained strength, pushing the exchange rate below the psychological threshold of 140 yen per dollar.

→ After the price broke above the upper boundary of the blue channel (signifying overbought conditions), a correction (such as to the channel's median) appears appropriate.

Bearish argument:

→ The brief breach above the prior swing high (indicated by an arrow) may have created a bull trap and triggered stop-losses for sellers positioned just above the 3 September high. Today’s decline supports the view that the break above 147.230 was a false breakout.

What’s next for USD/JPY?

Much will depend on the fundamentals.

On Friday, traders are closely watching US labour market data (to be released at 15:30 GMT+3), which could influence US interest rate expectations. Meanwhile, the yen's movement is affected by uncertainties surrounding Japan’s upcoming prime ministerial change. According to Reuters, recent comments from Shigeru Ishiba have fuelled expectations that Japan's rate hikes might be delayed.

Additionally, demand for safe-haven assets is impacting USD/JPY as markets assess the effects of rising tensions in the Middle East on the global economy.

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