USD/JPY Price Analysis: Prepares for a fresh rally

• USD/JPY prepares for a fresh rally amid strength in the US Dollar Index.
• The US Dollar remains firm US Dollar due to steady labor growth in August despite higher interest rates by the Fed.
• USD/JPY has been consolidating in a narrow range of 145.58-147.38 for the past three weeks.

The USD/JPY pair gathers strength to extend the V-shape recovery above the immediate resistance of 146.50. The asset remains solid due to a firmer US Dollar amid steady labor growth in August despite higher interest rates by the Federal Reserve (Fed).

The market mood remained majorly quiet on Monday due to an extended weekend in the US on account of Labor Day. The US Dollar Index (DXY) corrects gradually to near 104.00 from the four-day high of 104.20 as investors await the ISM Services PMI for August, which will be published on Wednesday.

Meanwhile, hopes that the Fed will keep interest rates unchanged in the remaining year rose as labor market conditions cool down further. The Unemployment Rate rose and wage growth slowed in August.

USD/JPY has been consolidating in a narrow range of 145.58-147.38 for the past three weeks. The asset is demonstrating a volatility contraction and is expected to deliver a decisive action after a consolidation break.

The asset continues to find support from the upward-sloping 20-day Exponential Moving Average (EMA), which trades around 145.31. Also, advancing 50-EMA indicates that the short-term trend is extremely bullish. Potential resistance is plotted from 21 October 2022 high at around 152.00.

The Relative Strength Index (RSI) (14) aims to stabilize into the bullish range of 60.00-40.00. An occurrence of the same will activate the upside momentum.

Going forward, a decisive break above August 29 high at 147.38 will expose the asset to the psychological resistance of 150.00, followed by 21 October 2022 high at around 152.00.

In an alternate scenario, a breakdown below September 1 low at 144.44 would drag the asset toward the 50-DEMA around 143.50 and July 21 high around 142.00.

USD/JPY daily chart