USD/JPY: potential for downside in the pair remains

Aug 21, 2026, 1:26:26 PM

Current trend

This week, the USD/JPY pair corrected from the middle line of the Bollinger Bands (159.37) and is currently testing the level of 158.59 (Murrey [3/8]), supported by macroeconomic statistics from Japan.

Thus, the Services PMI rose from 51.2 points to 52.3 points, and in the manufacturing sector — from 54.5 points to 55.1 points, with the growth in the number of new orders reaching a peak in over eight years as a result of increased demand for semiconductors due to the widespread development of artificial intelligence (AI) technologies. Most business representatives expect positive trends to persist and profits to increase further. In addition, the Consumer Price Index accelerated from 0.3% to 0.4% MoM and from 1.6% to 1.9% YoY, while the core indicator rose from 0.1% to 0.5% and from 1.6% to 1.8%, respectively. Thus, the national economy is showing signs of recovery, and inflation is approaching the Bank of Japan’s target of 2.0%, which is the key condition for monetary policy tightening: most experts expect an interest rate adjustment of 25 basis points in September.

In the US, meanwhile, the July Consumer Price Index dropped from 3.5% to 3.4%, and the core CPI fell from 2.6% to 2.5% YoY, demand contracted by 0.6%, and cooling is observed in the labor market: Initial Jobless Claims for the week totaled 206.0K, below the forecast of 210.0K, but the four-week average number of applications increased from 199.75 to 204.0K, and the total — to 1.799M, which reduces the expediency of taking “hawkish” measures soon, and the probability of a change in the interest rate in September is estimated at 34.0%, although this figure for December still exceeds 65.0%. Additional pressure on the American dollar is exerted by the Treasury Department’s plans to buy back long-term government bonds, the volume of which, according to Treasury Secretary Scott Bessent, could exceed 4.0B dollars.

Overall, fundamental factors contribute to further weakening of the USD/JPY pair.

Support and resistance

The trading instrument is near the level of 158.59 (Murrey [3/8]) and, after a breakdown of 157.81 (Murrey [2/8]), may decline to the area of 156.25 (Murrey [0/8]) and 154.68 (Murrey [–2/8]); however, if it consolidates above the middle line of the Bollinger Bands 159.37 (Murrey [4/8]), a resumption of growth toward the targets of 160.93 (Murrey [6/8]), 162.50 (Murrey [8/8]), and 164.06 (Murrey [+2/8]) is expected.

Technical indicators maintain a sell signal: the Bollinger Bands and Stochastic are reversing downwards, while the MACD histogram remains stable in the negative zone.

Resistance levels: 159.37, 160.93, 162.50, 164.06.

Support levels: 157.81, 156.25, 154.68.

Trading tips

Short positions should be opened below 157.81 with the targets at 156.25, 154.68, and stop loss 158.80. Implementation time: 5–7 days.

Long positions should be opened above 159.37 with the targets at 160.93, 162.50, 164.06 and stop loss 158.30.

Scenario

Time frame	Weekly
Recommendations	SELL STOP
Entry Point	157.81
Take Profit	156.25, 154.68
Stop Loss	158.80
Support levels	154.68, 156.25, 157.81, 159.37, 160.93, 162.50, 164.06

Alternative scenario

Recommendations	BUY STOP
Entry Point	159.37
Take Profit	160.93, 162.50, 164.06
Stop Loss	158.30
Stop Loss	154.68, 156.25, 157.81, 159.37, 160.93, 162.50, 164.06