Current trend

The USD/JPY pair is showing confident growth, updating local highs of late July. The instrument is testing 153.65 for a breakout, while trading participants await the publication of the October report on the US labor market at the end of the week.

Forecasts suggest a decline in Nonfarm Payrolls in October from 254.0 thousand to 140.0 thousand, as well as a decline in Average Hourly Earnings from 0.4% to 0.3% month-on-month, while the annual growth rate of the indicator may remain around 4.0%. In turn, the Unemployment Rate is likely to remain at 4.1%. Also, on Friday, the US will release business activity data: the S&P Global Manufacturing PMI is expected to be unchanged at 47.8 points, while the Institute for Supply Management (ISM) Manufacturing PMI could accelerate from 47.2 points to 47.6 points.

The Bank of Japan will hold a meeting on Thursday, October 31: analysts at ING Groep N.V. believe that the regulator will not change monetary parameters, fixing the interest rate at 0.25%. As expected, the Tokyo CPI fell below 2.0% for the first time in months, while the overall figure slowed to 1.8% year-on-year in October (from 2.1% in September), in line with market consensus. However, the dynamics of the Core CPI indicate that the negative dynamics will continue: it added 1.8%, exceeding market expectations. In turn, the CPI excluding Fresh Food and Energy, accelerated from 1.6% in the previous month to 1.8%. Thus, the regulator will probably focus more on the steady growth of prices for services than on the slowdown in the main indicator.

In addition, September statistics on Retail Sales and Industrial Production will hit the market on Thursday: experts expect sales in annual terms to slow from 2.8% to 2.3%, and production in monthly terms to increase by 1.0% after –3.3% a month earlier, which could locally support the yen's positions.

Support and resistance

Bollinger Bands on the daily chart show a steady increase. The price range is expanding but it fails to conform to the growth of "bullish" sentiments at the moment. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic is reversing upwards again after attempting a corrective decline in the middle of last week. The indicator is currently near its highs, indicating the risks of the US dollar being overbought in the ultra-short term.

Resistance levels: 154.50, 155.50, 156.50, 157.50.

Support levels: 153.50, 152.50, 151.50, 150.50.

Trading tips

Long positions may be opened after a breakout of 154.50 with the target at 156.50. Stop-loss — 153.50. Implementation time: 2-3 days.

A reversal of the instrument downward near current levels followed by a breakdown of 152.50 may become a signal to open short positions with a target of 150.50. Stop-loss — 153.50.