The USD/JPY currency pair inched up just 0.22% to close at 120.48 yen per dollar on Friday, after Federal Reserve Chair Janet Yellen told the audience at the University of Massachusetts Amherst on Thursday evening that it would likely be appropriate to raise rates from near zero "sometime later this year," although the decision would continue to rely on economic data. Last week, the U.S. Federal Reserve decided to hold off a rate hike and maintain their zero interest rate policy after its Federal Open Market Committee (FOMC) Meeting, noting the economic slowdown in China and emerging markets as the reason for the delay.

The federal-funds futures, commonly used to estimate the market’s views on the likelihood of changes in U.S. monetary policy, indicate only 11% odds for a quarter-point rate hike at the October 2015 policy meeting, while the odds are 39% at the December 2015 meeting, according to data from CME Group, as of September 25. 

Separately, the U.S. Commerce Department said on Friday that the third estimate of the U.S. second quarter gross domestic product (GDP) was revised upward to 3.9%, from the previous estimate of 3.7%. Consumer purchases, which account for about 70% of U.S. economic activity, were revised upward to 3.6% from a prior estimate of 3.1%. The revision came mostly from health care and transportation spending.

The global financial firm Markit, said on Friday that its U.S. Flash Purchasing Managers Index (PMI) for the services sector fell to a three-month low of 55.6 in September, in line with the economists’ forecast by Reuters. A reading above 50 indicates expansion in the sector while a reading below 50 shows contraction. 

Prior to the release of the U.S. Services PMI, Markit said on Thursday that the flash Nikkei Manufacturing PMI for Japan came in at 50.9 for September, down from 51.7 in August, the lowest in three months. The Nikkei Japan PMI reading fell short of the median analysts' forecast of 51.2. The Japanese yen was little changed on the weak Nikkei Japan Manufacturing PMI data, as currency traders might have been waiting for more data from the U.S. later that day.

More bad economic news for Japan this week came from the Bank of Japan (BoJ), which said on Friday that core consumer prices, which exclude fresh food prices, fell 0.1% in August from a year earlier, after hovering near zero for months. The so-called “core core” inflation index, which excludes food and energy prices, rose 0.8% in the year to August.

Separately, the Cabinet Office released its September monthly report on Friday showing that Japan's economy was on track to recover but acknowledged some parts of the economy had slowed due to sluggish private consumption. The report said that the weak response from consumer spending and business investment to an improving labor market and record corporate earnings raises a concern.

Japanese Prime Minister Shinzo Abe, who was officially appointed to another three-year term as leader of the Liberal Democratic Party on Friday, announced three new pillars of his “Abenomics” policy including an expansion of Japan nominal gross domestic product to 600 trillion yen, from nearly 500 trillion yen in fiscal 2014, though he didn’t elaborate how or when that growth would be achieved.

As of September 15, there are 67,344 short positions of Japanese yen (CME:6J), traded on the Chicago Mercantile Exchange (CME) in units of 12,500,000 Japanese yen, by leveraged funds, a decrease of 814 contracts since last week, according to the Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) each Friday. This is compared to about 27,074 long positions, a decrease of 13,234 contracts during the same period. The net short positions have increased by 14,048 contracts, worth about 175.6 billion yen, reflecting the bullish sentiment for USD/JPY.

Technically, USD/JPY has been trading in an up-trend channel since the end of 2014. The currency pair broke down the ascending triangle chart pattern and plunged 4.8% to a technical support at the 116 yen per dollar level in late August, as currency traders were selling the U.S. dollar, British pound and euro and moved their cash into the Japanese yen as a safe-haven trade during the global financial market turmoil. 

Since then, the USD/JPY has been moving in a symmetrical triangle chart pattern as traders can’t decide in which the direction of the Japanese yen will move next. The currency pair was also unable to break out the 120.50 yen per dollar level, or the 61.8% Fibonacci retracement, despite the bad economic data from Japan that keeps piling up while a U.S. Federal Reserve rate hike looms.

From the chart pattern, it looks more likely that the USD/JPY will eventually break out to the upside, sooner rather than later, as demand erodes over time. Meanwhile, the Japanese yen remains a safe-haven as the currency market is still convinced that the U.S. and EU economies are slowing down and China's economy is heading for a hard landing.