Article by ForexTime
The USD/JPY dropped after posting a one-month peak in Tokyo trade at 120.98, which coincides with the 200-day moving average, and which proved and an effective resistance as the pair subsequently fell to the low 120.00s. There was some cheer from the domestic front, with Japanese manufacturing expanding by the most in 18 months, according to the October outcome of the Nikkei/Markit survey. The headline reading came in at 52.5, up from 51.0 in September and above the median forecast for 50.5.
Markit noted that there was solid international demand, which is encouraging after September trade data this week revealed a 3.5% drop in exports to China. The BoJ will update its growth and inflation forecasts at its upcoming meeting, next Friday October 30. There is some speculation that the central bank will announce additional stimulus, though the BoJ’s governor, Kuroda, recently appeared to rule this out, while the minutes to the previous policy meeting revealed a fairly upbeat tone.
The next level of target support on the currency pair is seen near the 50-day moving average at 119.88. Momentum has turned higher as the MACD (moving average convergence divergence) generated a buy signal. This occurs as the spread crosses above the 9-day moving average of the spread.
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