USD/JPY Price Forecast: Sticks to modest gains near mid-143.00s, not out of the woods yet

• USD/JPY gains positive traction for the second straight day, albeit lacks bullish conviction.

• The formation of a descending channel points to a well-established short-term uptrend.
  

• A move beyond the 144.00 mark is needed to support prospects for further appreciation. 
  

The USD/JPY pair attracts some buyers for the second straight day on Tuesday and trades around mid-143.00s during the first half of the European session. Spot prices, however, lack bullish conviction and remain below the overnight swing high as traders prefer to wait on the sidelines ahead of the crucial US inflation figures this week. 

In the meantime, a downward revision of the second quarter Gross Domestic Product (GDP) print continues to undermine the Japanese Yen (JPY) and acts as a tailwind for the USD/JPY pair amid a modest US Dollar (USD) uptick. That said, the divergent Federal Reserve (Fed)-Bank of Japan (BoJ) policy expectations hold back investors from placing aggressive bullish bets and cap the upside for the currency pair. 

From a technical perspective, the recent downfall witnessed over the past four weeks or so has been along a descending channel. This points to a well-established short-term downtrend and supports prospects for the emergence of fresh selling at higher levels. The negative outlook is reinforced by the fact that oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone.

Hence, any subsequent move up might still be seen as a selling opportunity and remain capped near the 144.00 mark. That said, some follow-through buying could trigger a short-covering rally and lift the USD/JPY pair to the next relevant hurdle around the 144.55 region. The momentum could extend further towards reclaiming the 145.00 psychological mark before spot prices climb further toward the 145.60 resistance zone.

On the flip side, the 143.20 area is likely to protect the immediate downside ahead of the 143.00 mark and the Asian session low, around the 142.85 region. Failure to defend the said support levels will reaffirm the negative bias and expose the 142.00 round figure and a seven-month low, around the 141.70-141.65 region touched in August.

USD/JPY 4-hour chart