Local Resistance Rejection Could Trigger Another Bearish Leg

Manuel

Central Bank

Economic

Summary:

This divergence in momentum behavior suggests that the pair struggled to sustain its upward movement near resistance.

SELL USDJPY

EXP

TRADING

157.682

Entry Price

155.390

160.100

157.857 -0.461 -0.29%

0.0

Pips

Flat

155.390

Exit Price

157.682

Entry Price

160.100

Data released on Wednesday by the US Bureau of Labor Statistics (BLS) showed that the Consumer Price Index (CPI) rose by 3.7% year over year in September, accelerating from 3.4% in August. The reading also exceeded market expectations of 3.6%, reinforcing concerns that inflationary pressures in the US remain persistent and could complicate the Federal Reserve’s efforts to bring price growth back toward its target.

Core CPI, which excludes the more volatile food and energy components, increased by 2.6% year over year in September, compared with 2.4% in the previous month and above the 2.5% expected by the market. On a monthly basis, headline and core CPI rose by 0.6% and 0.3%, respectively. The figures point to renewed inflationary pressure, particularly in the headline reading, while the stronger-than-expected core figure could further influence expectations regarding the Fed’s next policy decisions.

Federal Reserve (Fed) President Mary Daly said on Wednesday that the central bank may need to raise interest rates further in the near term to contain inflation that remains too high. However, she also noted that there is no need to implement another increase at the Fed’s October 27–28 meeting. Her comments suggest that further tightening remains a possibility, although policymakers may prefer to assess incoming economic data before making another adjustment.

According to the CME FedWatch tool, markets now assign approximately a 24.9% probability to a US interest rate increase this month, up from around 22.1% before the inflation data were released. Meanwhile, the probability of a rate increase in December is priced at approximately 66.7%. The shift in expectations reflects the market’s response to the stronger inflation figures, although the Fed’s eventual decision will depend on how policymakers assess the persistence of price pressures and the broader economic outlook.

The United States has reportedly proposed that European nations release some Russian sovereign assets frozen following Moscow’s invasion of Ukraine and transfer them into a financial arrangement managed by Washington. According to the *Financial Times* on Wednesday, the proposal forms part of broader efforts to revive peace negotiations. The plan could introduce additional complexity into discussions over the use of frozen Russian assets, as governments consider the legal, financial, and geopolitical implications of such a move.

The proposal was discussed during meetings held in Miami last week, attended by peace negotiators representing US President Donald Trump, as well as officials from Ukraine, France, Germany, the United Kingdom (UK), the European Union (EU), and NATO. The discussions highlight the continued diplomatic efforts surrounding the conflict, while the potential use of Russian sovereign assets remains a sensitive issue for the governments involved.

Bank of Japan (BoJ) Governor Kazuo Ueda reiterated the importance of keeping inflation expectations anchored near the central bank’s 2% target. However, he provided no clear indication of when policymakers might resume raising interest rates. His comments suggest that the BoJ continues to monitor price developments carefully while weighing the appropriate timing for further monetary tightening.

Reports indicate that BoJ officials are leaning toward skipping a second consecutive rate increase at their October 30 meeting, while keeping the possibility of a move in December open. This follows the increase in the policy rate to 1.25% on September 18. Overnight index swaps, which traders use to express views on future BoJ interest rates, place the probability of an October increase near 10%, compared with approximately 88% for December. Meanwhile, the BoJ’s own survey, published on Tuesday, showed that households expect prices to rise by an average of 11.8% over the coming year. These expectations could remain an important consideration for policymakers as they assess inflation risks and the need for further rate adjustments.

Meanwhile, Japan’s Vice Minister of Finance for International Affairs, Mimura, the country’s top foreign exchange official, told markets on September 28 to take Tokyo’s and Washington’s warnings regarding the yen at face value. His comments underline the authorities’ continued attention to currency movements, particularly as exchange rate developments can influence import costs and domestic inflation. Local Resistance Rejection Could Trigger Another Bearish Leg_1

Local Resistance Rejection Could Trigger Another Bearish Leg_1

Technical Analysis

USDJPY has reacted sharply to the downside after reaching the resistance level at 158.97, an area the pair recently tested again on October 24 during another attempt to challenge the level. The latest rejection suggests that selling pressure has emerged near this zone, potentially limiting further upside in the short term. The resistance area is close to the 200-period moving average at 159.55, while the 100-period moving average is positioned lower at 157.57. If bearish momentum continues, the pair could move toward the next local support level at 155.39, which may act as a potential downside target and an area where price could encounter renewed buying interest.

Regarding the oscillators, the RSI is currently at 43, moving into bearish territory while retaining sufficient room to decline further. During the previous test of the same resistance area, the RSI reached 69, approaching overbought territory relatively quickly even though the price advance itself remained limited. This divergence in momentum behavior suggests that the pair struggled to sustain its upward movement near resistance. Meanwhile, the MACD has shifted from an extended period of relatively narrow movement to a bearish histogram, which could begin to gain depth if selling pressure persists. Its signal lines remain slightly above the neutral zone but could cross into bearish territory relatively quickly. Taken together, these signals support the possibility of another downward leg, particularly if USDJPY remains below resistance and the bearish histogram continues to expand.

Trading Recommendations

Trading direction: Sell

Entry price: 157.67

Target price: 155.39

Stop loss: 160.10

Validity: Oct 23, 2026 15:00:00

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Local Resistance Rejection Could Trigger Another Bearish Leg

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