Dollar–yen recovers momentum following recent drop

USD/JPY edged higher in early Monday trade, recovering part of Friday’s nearly 1% drop that followed dovish remarks from Fed Chair Powell.

Friday’s losses were cushioned by the rising 55-day moving average at 146.60, which has been tracking the pair’s uptrend since early July, along with support from the top of the ascending daily Ichimoku cloud, spanning 146.70–145.64.

The pair has returned to the 146.21–148.77 range, where it has held for a fourth straight week. However, downside risks remain in play as long as the price stays near the lower bound of the range and remains capped by the daily Tenkan-sen at 147.50.

The daily chart presents a mixed technical picture: Tenkan/Kijun-sen are in a bearish alignment, while 14-day momentum has turned negative, contrasting with support from the rising cloud and 55DMA. Markets are looking for stronger directional signals.

Attention now turns to Friday’s release of US PCE inflation data, followed by next week’s labor market reports, both key to shaping expectations ahead of the Fed’s September policy meeting.

A decisive break above the Tenkan-sen would be the first bullish signal, with a rise through the Kijun-sen at 148.38 likely to confirm bullish momentum and bring the psychological 150 level back into focus.

On the flip side, a drop below the cloud top and 55DMA would undermine near-term structure and signal potential continuation of the broader downtrend from the Aug 1 peak at 150.91.

Res: 147.50; 147.80; 148.38; 148.77
Sup: 146.70; 146.21; 145.82; 145.64