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  • USD/JPY holds in familr territory, with the Dollar reaching fresh cycle highs of late.  
  • Technical indicators on the daily chart have lost their directional strength.

USD/JPY ranged between 106.10 and 106.40 on Friday and has started out the week between 105.89 and 106.20, slightly down in Toyo’s open ahead of a loose environment with the US holiday.  The focus has been on the Dollar reaching fresh cycle highs – the build-up with which saw the positioning data for the week ending 27 August 2019 leveraged funds selling USD for the second week, while asset managers bought USD for two weeks in a row with the move higher potentially attracting fresh demand from funds ahead of the Federal Reserve this month. Markets are still pricing in a 52 basis point of easing at the 19 September Fed meeting. Meanwhile, and as for US yields, the US 2-year treasury yields fell from 1.54% to 1.50%, the 10-year yield moved from 1.54% to 1.49%.  

US data is key this week

In the lead-in, US data will be of a special focus. We have both key manufacturers as well as US Nonfarm Payrolls. “We look for the ISM index to retreat modestly to 51 for August, continuing to reflect the subdued outlook for manufacturing. We also expect payrolls to trend lower to 145k in August, driven by a moderation in manufacturing employment and slower job creation in the services sector. The unemployment rate should remain steady at 3.7%, while wage growth likely declined to 3.0% y/y,” analysts at TD Securities explained,  

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreetm explained that the USD/JPY pair is trading around the 38.2% retracement of its August decline measured between 109.31 and 104.44, while the 50% retracement of the same figure is located at 106.85, providing an immediate resistance:

“Technical indicators on the daily chart have lost their directional strength, the Momentum within positive levels but the RSI at 46, this last keeping the risk skewed to the downside. In the mentioned chart the pair is barely holding above a flat 20 DMA while the larger ones keep heading south far above the current price. In the shorter term, and according to the 4 hours chart, the pair offers a neutral stance, barely holding above its 20 and 100 SMA but below the 200 SMA, which converges with the mentioned Fibonacci resistance, as technical indicators ease within neutral levels.”