FX.co ★ USD/JPY

The USD/JPY currency pair moved higher on the first day of the week as it recovered from Friday's post-BoJ decline to below 157.00. This pushed the spot price to the 157.85 area despite warnings of intervention from Japan's Finance Minister Satsuki Katayama. Katayama noted that the joint statement with the US on Foreign Exchange still stands and that the government is ready to take measures to avoid excessive or disorderly weakening of the Japanese yen. These comments do not support the JPY because of uncertainty around the timing of the next BoJ rate hike. In addition, the large interest-rate gap between Japan and other economies is pressuring the JPY. Meanwhile, expectations around Middle East diplomacy are a headwind for the safe-haven US Dollar (USD). Actually, according to reports, the Iranian delegation held a third day of talks with the Qatari intermediaries on Sunday to negotiate an agreement to stop the US and Israeli war on Iran. In addition, Iran suggested a 48-hour plan to open the Strait of Hormuz, provided the US met its terms. Meanwhile, US President Donald Trump stated that negotiations went very well and that Iran wanted an agreement. Nevertheless, Trump noted that he has not ruled out the possibility of military strikes against Iran after the mid-term elections on November 3. Besides, the Supreme Leader of Iran, Mojtaba Khamenei, ordered his top military leaders to be ready for a new round of confrontation with the US and Israel. In addition, new Ukrainian strikes on Russian oil refineries sustain the geopolitical risk premium, while Fed rate-hike expectations favor USD bulls. US economic figures, which were published on the previous Thursday, revealed the resilience of the economy along with sustained price pressures. Also, concerns about rising inflation from higher crude oil prices have made further tightening by the Federal Reserve more likely. According to the CME Group's FedWatch Tool, the US central bank has nearly a 75% chance of raising interest rates in December. The USD/JPY currency pair is now testing the 23.6% Fibonacci retracement line, which stands at 157.80 in a weak bullish short-term setup. In addition, price is currently trading above the 100-period SMA at 157.75, indicating strong underlying demand during corrections and the overall move toward higher levels in the recent retracement pattern. Meanwhile, the next major resistance is the cycle high around 158.34, where a breakout could trigger further moves within the broader bullish trend. As for support, immediate support is at the 23.6% Fibonacci retracement level around 157.80, followed by the 38.2% retracement around 157.47 and the 50.0% retracement level around 157.21.