USDJPY re-enters its range after US-Japan trade deal—will it hold?

USDJPY hasn’t failed to generate some volatility in the past few weeks.

The pair, which had seen some steep up moves since the beginning of July, has been met by some sharp realities for its bulls. 

Such Daily ranges are strong, and without weekly closes or a substantial fundamental change, Technicals indicate that they are expected to hold.

In today’s analysis, however, we will try to spot if anything from the new situation emerging in Japan has the potential to create a real upside breakout or if the range is deemed to continue.

Also we'll be monitoring the effect of the ISM PMI results on the pair – Services PMI Came in with a beat (55.2 vs 53.0 exp) and Manufacturing PMI missed (49.5 vs 52.5)
The immediate reaction is one of an USD selloff but this is subject to change

Read More: Pump-fake from the US Dollar — North American Mid-Week Market Update

For a quick reminder, Japanese elections happened and the Ruling coalition (LDP + Komeito) lost its majority in the Upper House for the first time in a while.

The present government had a lot of influence on the dovish policies from the Bank of Japan, and with the ongoing situation, Japan's PM Ishiba might have to depart from his functions (he indicated he should stay to treat with the US Deals)

As a matter of fact, the Deal got reached yesterday, further confirming the newfound boost in the Yen that had already started to happen around the elections – There has been talks about the Deal not being implemented if "Trump is not happy" Scott Bessent said, but that would be a political mistake.

PM Ishiba pledged to make sure that the deal concludes.

Let's now take a look at the technicals to see if they indicate anything new to tilt the scales further.

Positioning isn't giving us much – normally providing us with a decent contrarian indicator and with a small tilt long, the assumption would be for some small downside correction, however the difference in positioning is not so big.

Momentum shut back to neutral after the past 3 sessions of US Dollar selloffs after rejecting the 200-Day Moving Average and participants will now be testing the Immediate 146.00 Pivot region.

Any downside breach would see the 50-Day MA as support (currently at 145.20), with no other key zone for buyers to step in before the 142.00 Main Daily support.

Sellers regained some strength in the past few sessions and will have to push below the Pivot zone mentioned just before to further maintain the range.

Some mean-reversion happened at the 4H-200 MA at 145.72 which will be a key barometer for immediate momentum (breach below, bearish – Holding above, bullish)

There is some ongoing selling after the PMI data but some decent volumes would be required to retest the overnight levels.

Looking closer to the 30m intraday timeframe, the rejection at the immediate downwards trendline after testing 146.87 highs in the morning session does shows slightly bearish momentum.

Update: The ongoing selling actually has been met by some buying momentum after a bounce on the 30M MA 50 – buyers will now look to test the highs of the day, monitor any breakout from the immediate trendline.

Monitor reactions at the 146.00 level – some key intraday levels to place on your charts:

Support Levels:

• Immediate intraday support 146.37 and 30m MA 50
• 146.00 Pivot Zone (+/- 100 pips)
• Overnight lows 145.85
• Main Daily Support 142.00 region

Resistance Levels:

• Morning swing high 146.87
• 30m MA 200 147.20
• May Range extremes 147.50 to 148.00

Safe Trades!