USD/JPY was quite bullish for many months as the JPY plunged lower after the Bank of Japan kept interest rates unchanged while other major central banks kept increasing them, but made a bearish reversal last month as the FED turned softer. The JPY continues to strengthen against the US Dollar (USD), supported by growing expectations of a policy shift from the Bank of Japan (BoJ) which has given some hawkish signals.

Recent Japanese inflation numbers imply progress toward sustained inflationary tendencies, allowing the Bank of Japan to consider tightening its expansive monetary policy. However, inflation remains low in Japan compared to other developed countries. Buyers kept pushing hgiher and this price reached the all-time high at around 152 last month, but they failed to break above this level and since then sellers have taken control ion this pair.

Moving averages such as the 20 SMA (gray) were acting as support on the daily chart during the bullish trend, indicating that the buying pressure was strong. Although they are getting broken as the selling pressure persists. The 100 SMA (green) held as support on Wednesday last week and we saw a decent bounce off that moving average on Thursday, but sellers returned on Friday and reversed all the gains, finally pushing the price below the 100 daily SMA as well, which opens the door for further losses in this forex pair.

Some of the economic data from the US has shown some weakness recently, which should keep the USD soft. Besides that, fears of a worldwide economic slowdown should keep a lid on any bullish attempts on the USD/JPY pair. Tomorrow we have the JOLTS jobs openings figures and the US ISM services which will give a snapshot of the services and the labour market at this time, while the FOMC meeting is on Wednesday, with markets expecting the FED to hold rates as they are.

USD/JPY Live Chart