FX.co ★ Wiking | USD/JPY

USD/JPY is pulling back from 156.00, near its lowest level in more than a month, on Friday, while the pair held gains through the start of European trading. Spot prices are expected to capitalise further on the bullish trend beyond 157.00 on the backdrop of a generally stronger US dollar (USD), but are likely to suffer heavy losses this week. Although the Fed is increasingly likely to keep rates unchanged at next week's meeting, market participants are pricing in an 80% chance of a rate hike by year-end amid concerns about oil-induced inflation. Furthermore, rising tensions in the Middle East add to the geopolitical risks, supporting demand for the safe-haven dollar (USD. Meanwhile, Japan's National Consumer Price Index (CPI) report came out today, once again confirming expectations of an imminent interest rate hike by the BoJ. Traders have also remained vigilant that any further weakening of the Japanese Yen (JPY) could prompt currency intervention, which may keep the upper limit for the USD/JPY pair before next week's major central bank decisions. The Fed is set to announce its rate decision at the end of a two-day monetary policy meeting on October 28, followed by a Bank of Japan (BoJ) meeting on October 29-30. Traders will also face the release of the Advance US Q3 GDP and Personal Consumption Expenditures (PCE) Price Index next Thursday, which will affect USD price action. Technically, the break below the 157.50 support area, which marks the 23.6% Fibonacci retracement of the September advance and the bottom of a three-week-old range, was seen as an important catalyst for bears. Also, the failure to break above the 200 SMA level of 158.55 supports the view that the path of least resistance is likely to remain lower for USD/JPY. On the other hand, the MACD indicator shows the MACD line trading below the signal line, with both lines near the zero level and a small negative histogram, indicating fading upward momentum. By contrast, the RSI level of 43.77 is also below the midpoint, pointing to a corrective environment rather than an uptrend, making it possible to sell any further advance. Meanwhile, early resistance will be at the 23.60% retracement of 157.56, then at the 200-day SMA of 158.55; breaking through this consolidation range will open the cycle-high anchor point at 158.98. On the downside, early support will be at the 38.20% retracement of 156.68, then move to the 50.00% retracement of 155.98, with further Fibonacci support at 155.27 and 154.26, with 152.97 serving as the overall structural support on the chart.