According to Japan’s Manufacturing PMI, September data indicated that the Japanese manufacturing sector moved another step closer to stabilization, helped by the slowest fall in new orders since January. At the same time, hopes of a longer-term recovery in production volumes strengthened, with growth expectations for the year ahead rising to the highest since May 2018.

Supporting the rise in the PMI during September, the latest data indicated the weakest decline in production volumes for seven months. Manufacturers reporting a drop in output mostly commented on project cancellations and subdued demand levels due to the coronavirus disease 2019 (COVID-19) pandemic. However, the latest decrease in production was modest in comparison to the rate of contraction seen during the second quarter of the year.

Nikkei came out with the news suggesting the government’s readiness for further stimulus. It should also be noted that Japanese Prime Minister Suga recently turned down calls for a snap election and triggered skepticism as the politician earlier cheered this idea.

On the other hand, The US 10-year breakeven rate, a bond market’s measure of expected inflation derived from 10-Year Treasury Constant Maturity Securities and 10-Year Treasury Inflation-Indexed Constant Maturity Securities, fell from 1.76% to 1.63% in September. The market-based measures of long-term price pressures declined even as the Federal Reserve adopted a more flexible approach to controlling inflation at the end of August.

US policymakers are inching closer to the much-awaited stimulus despite failing to agree on Wednesday. The American Congress even passed a stopgap funding bill to let the government work after the previous deadline expired on September 30. Further, the coronavirus (COVID-19) risk pushes the UK towards national lockdown amid a lack of major progress at the vaccine front.

USD/JPY 4 Hour Chart:

Support: 105.32 (S1), 105.16 (S2), 104.92 (S3).

Resistance: 105.72 (R1), 105.96 (R2), 106.12 (R3).

With a lack of major catalysts, USD/JPY traders will keep eyes on the US session that carries the weekly Jobless Claims and the September month ISM Manufacturing PMI. We expect a bearish trend for the pair till the next US news changes the market tone.