Japan’s manufacturing PMI has been mired in contraction territory since November 2018. In September, the index improved to 47.3, up from 46.6 beforehand. Inflation levels remained very low. BOJ Core CPI, the central bank’s preferred inflation gauge, remained at zero for a second successive month.

In the US, Federal Reserve Chair Powell had a busy week testifying on Capitol Hill. Powell reiterated that the Fed was using all available tools to support the budding economic recovery. He also called on Congress to provide additional fiscal stimulus.

The US Flash Manufacturing PMI for September came in at 53.5, almost unchanged from 53.4 a month earlier. Importantly, the reading beat the estimate of 52.5 points. The index has been in expansion territory for four straight months, with readings above the 50-level, which separates expansion from contraction. On the services front, Flash Services PMI came in at 54.6, just shy of the previous release of 54.8 points. The respectable reading points to a solid rise in business activity, another sign that the economic recovery is strengthening.

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

We start at the round number of 108, an important monthly resistance line.

107.29 (mentioned last week) is protecting the 107 level.

106.44 is next.

105.45 is an immediate support level.

104.50 has some breathing room in support.

103.52 has held in support since March.

102.13 is the final support line for now..

USD/JPY Daily Chart

USD/JPY Sentiment

I remain bullish on USD/JPY.

With the US economy showing signs of recovery, the US dollar has plenty of upward momentum. This could translate into gains for USD/JPY this week. (UUP, FXY)