USD/JPY continues to renew record highs and is approaching the key level of 140.00.
The growth of the pair occurs amid strengthening of the dollar, which received support from Jerome Powell's speech at the symposium in Jackson Hole on August 26, during which the head of the Fed confirmed the regulator's intentions to continue its aggressive tightening of the monetary policy "until the complete victory over inflation.
Investors expect the Fed to raise the rate by 75 basis points in September. The probability of this scenario rose to 74%. Against this backdrop, U.S. bond yields are rising.
Due to the fact that the Bank of Japan does not intend to abandon its soft monetary policy and to cut its economic stimulus programs, the difference between the rates of central banks makes the advantage of the dollar undeniable. Investors don't even pay attention to good Japanese statistics. Yesterday the Industrial Production in Japan showed a 1.0% growth in July. Retail sales were up 2.4% MoM, compared to the forecast of 1.9%. We can say that consumer activity in the Land of the Rising Sun is recovering. Inflation has reached 2.6%, which is nothing compared to the U.S. or the Eurozone. Nevertheless, Junko Nakagawa, Governing Council Member of the Bank of Japan, believes that further growth in inflation will have a negative impact on household spending
Moreover, Japan manufacturing PMI showed an increase from 51.0 to 51.5 ppts in August.
USD/JPY Technical analysis
On the daily chart the mfi indicator and the Bollinger Bands are surely pointing in the direction of strengthening of the pair.
MACD indicator continues to grow in the positive range and holds a strong buy signal.
Stochastic Oscillator is in the area of maximum values.
After a confident breakdown up of the level 139.67, buy entry is considered with the calculated target 141.50. Stop-loss is to be set at 138.50.
If the "bulls" are unable to break above 139.67, we expect decline in the asset and fixation of the price below support 138.50. From here we will form short positions towards136.40. Placement of a stop-loss at 139.67.