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Rejection at Local Support Zone Paves the Way for Further Upside
Forex
Economic
Summary:
During the recent drop toward local support, the RSI rapidly touched 27, dipping into oversold territory even on a small price movement, which signals that sellers are losing control quickly.
Buy
TradingUSDJPY
EXP
159.187
Entry Price
161.800
TP
157.500
SL
159.028 -0.156 -0.10%
0
Point
Flat
157.500
SL
CLOSING
159.187
Entry Price
161.800
TP
In Japan, the national Consumer Price Index (CPI) rose 1.9% year-over-year in July, accelerating from the 1.6% reading recorded in June and marking its highest pace of the year. Core inflation, which excludes fresh food, also picked up to 1.8% year-over-year compared to the prior 1.6% figure.
These figures reinforce expectations for further monetary policy tightening by the Bank of Japan (BoJ). According to Bloomberg, markets are currently pricing in roughly an 82% probability of a rate hike in September—a sharp increase from the 23% estimated prior to the July policy meeting.
However, despite growing expectations of policy adjustments, borrowing costs in Japan remain significantly lower than in other developed economies. This wide interest rate differential continues to favor carry trade operations, where investors borrow in yen to fund positions in higher-yielding assets across other markets.
On the geopolitical stage, tensions continue to command global market attention. U.S. Treasury Secretary Scott Bessent is preparing to announce new sanctions against Iran, while Tehran warned it could restrict oil exports through the Strait of Hormuz and other strategic Persian Gulf routes if what it describes as an "economic war" driven by Washington persists. This environment keeps inflation risks linked to potential energy supply disruptions active.
Pressure on Iran increased further after U.S. President Donald Trump announced that tariffs on automobiles, trucks, auto parts, and steel from Canada will rise to 50% starting January 1, 2027. Trump argued that Canada has benefited for years from its trading relationship with the United States and urged affected companies to shift production to U.S. soil to avoid the new tariffs.
Meanwhile, minutes from the Federal Reserve's most recent meeting revealed that several monetary policymakers remain concerned about persistent inflationary pressures. The document noted that alongside officials such as Beth Hammack, Neel Kashkari, and Lorie Logan, other committee members would also be open to supporting additional interest rate hikes if inflation fails to show further cooling in coming months.
Technical Analysis
USDJPY has corrected upward following joint intervention efforts by the U.S. Treasury and the Bank of Japan. That initial move has begun to reverse; while the 100-period moving average previously held price down as dynamic resistance, price dropped to test local support at 158.05—the level established during the first intervention wave—and staged a clear bullish rejection. Price has now closed back above the 100-period moving average, currently at 158.64, while the 200-period average sits higher at 160.67. This upward momentum could extend further toward the resistance target at 161.81.
Turning to the oscillators, the RSI currently sits at 54, positioning slightly above the neutral zone with ample space to extend higher. During the recent drop toward local support, the RSI rapidly touched 27, dipping into oversold territory even on a small price movement, which signals that sellers are losing control quickly. Meanwhile, the MACD shows a bullish histogram; as it gains depth, the signal lines should push above the neutral line, adding further confirmation to the upside move.
Trading Recommendations
Trading direction: Buy
Entry price: 159.15
Target price: 161.80
Stop loss: 157.50
Validity: Sep 04, 2026 15:00:00
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