Japanese manufacturer confidence has reached its highest level in over three years, primarily driven by the July trade agreement between Japan and the U.S., which has alleviated trade uncertainties. The September manufacturing sentiment index stands at 13, surpassing August's 9 and marking the highest since August 2022. The automotive and transportation machinery sectors have shown notable strength, with sub-indices rising from 25 to 33, the highest since December 2023. Some industry managers report stable order volumes; however, export weakness has led to production stagnation. Additionally, managers in the precision machinery sector indicate that tariffs implemented by the Trump administration have suppressed order demand. Looking ahead, manufacturers generally express concerns over inflation's impact on consumer spending and rising material and labor costs. The services sector index rebounded to 27 after hitting a nine-month low in August, with improvements observed in real estate, retail, and transportation industries, while wholesale and IT sectors remain under pressure. Revised Q2 data show Japan's GDP grew at an annualized rate of 2.2%, indicating domestic consumption continues to underpin economic growth. Meanwhile, market attention remains focused on the intra-LDP leadership contest, which could influence the Bank of Japan's monetary policy stance in the coming years. The intersection of political developments and policy debates has reignited uncertainty surrounding the yen's trajectory, leading to a consolidation phase in the USDJPY.

In the U.S., the dollar remains resilient as investors await inflation data, with Thursday's report likely to serve as a pivotal point in redefining the trajectory of the financial markets toward the end of the year. July wholesale inventories increased marginally by 0.1%, below the prior forecast of 0.2%, indicating continued caution among enterprises following inventory reductions. Motor vehicle inventories declined by 1.6%, while inventories of apparel, pharmaceuticals, and food saw significant increases. Q2 inventory annualized figures decreased by US$32.9 billion, subtracting 3.29 percentage points from GDP growth; however, the narrowing trade deficit offset these negative effects, enabling the U.S. economy to rebound from a 0.5% contraction in Q1 to a 3.3% expansion in Q2. Concurrently, the August Producer Price Index (PPI) unexpectedly fell by 0.1%, below economists' forecast of a 0.3% increase, suggesting limited inflationary pressures at the production level. The primary drag was from declining service prices, with trade service profit margins decreasing by 1.7% and wholesale margins for machinery and automobiles dropping by 3.9%. Excluding food and energy, core PPI rose by 0.3% month-over-month and 2.6% year-over-year, below July's 3.1%. Following the weaker-than-expected PPI data, market traders widely anticipate the Federal Reserve to cut interest rates by 25 basis points at the September meeting and to maintain similar easing through the end of the year. Trump promptly called for an immediate and substantial rate cut via social media and repeatedly pressured the Fed; however, some analysts consider such a significant rate reduction to lack sufficient justification.

The USDJPY is oscillating between the upper and lower Bollinger Bands in the 4H timeframe, currently consolidating near the middle band. The MACD line and signal line are retracing toward the zero-axis, with some distance remaining. A golden cross has formed on the MACD, and the RSI is at 50, indicating a neutral market sentiment. If the price maintains above the middle Bollinger Band, it is likely to rally toward the upper band and previous resistance levels at approximately 148.2 and 149.2; failure to hold above this level could lead to a decline toward 145.8. In the 1W timeframe, Bollinger Bands are narrowing, with price oscillating around the middle band. Following the MACD bullish crossover, the MACD lines are retracing toward the zero-axis, and the RSI stands at 51, reflecting a predominantly sideways trend with potential for a trend reversal. The key focus is whether the price can sustain above the middle Bollinger Band; a successful hold could push the price above 150, while a failure might see a decline toward 146. It is recommended to go long at the lows.

Trading Direction: Buy

Entry Price: 147.7

Target Price: 149.6

Stop Loss: 145.8

Support: 145.8, 142.6, 141.6

Resistance: 149.6, 150, 151