- USD/JPY is set for a new recovery amid the strength of the Dollar Index.
- Dollar holds firm in the US due to steady labor growth in August, despite the Fed’s interest rate hike.
- The USD/JPY pair has been consolidating in a tight range of 145.58-147.38 for the past three weeks.
The USD/JPY pair is gathering strength to extend the V-shaped rally above the immediate resistance of 146.50. The pair remains strong due to a firmer US dollar amid steady job growth in August despite higher interest rates from the Federal Reserve (Fed).
Market sentiment remained mostly calm on Monday due to a long US Labor Day weekend. The Dollar Index (DXY) gradually corrected towards 104.00 from a four-day high of 104.20 as investors await the release of the August ISM Services PMI due on Wednesday.
Meanwhile, hopes are rising that the Fed will keep interest rates on hold for the remainder of the year as labor market conditions cool further. The unemployment rate rose and wage growth slowed in August.
USD/JPY has been consolidating in a tight range of 145.58-147.38 for the past three weeks. The pair is demonstrating a volatility contraction and decisive action is expected after a break of consolidation.
The pair continues to find support at the 20-day EMA, which is trading around 145.31. Furthermore, the advance of the 50 EMA indicates that the short-term trend is extremely bullish. Potential resistance is at the 21 Oct 2022 high around 152.00.
The Relative Strength Index (RSI) (14) aims to stabilize in the bullish range of 60.00-40.00. If it occurs, the bullish momentum would be activated.
Looking ahead, a decisive break above the Aug 29 high at 147.38 will expose the asset to psychological resistance at 150.00, followed by the Oct 21, 2022 high around 152.00.
In an alternative scenario, a break below the 1st September low at 144.44 would drag the asset towards the 50 EMA around 143.50 and the 21st July high around 142.00.
USD/JPY daily chart
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Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
