US Economic Calendar

Later in the session on Wednesday, the FOMC Meeting Minutes will require investor consideration. Speculation about multiple 2024 Fed rate cuts has pulled the USD/JPY to 145.

Concerns about the US labor market and support for multiple rate cuts could affect US dollar demand. Comments on the size of a September rate cut may be crucial for the USD/JPY pair.

According to the CME FedWatch Tool, the probability of a 50 basis point September Fed rate cut was 24.5% on Tuesday, compared to 75.5% for a 25-basis point cut. A 50-basis point September rate cut could fuel speculation about a 100-basis point cut to the FFR in September, November, and December.

A more dovish Fed rate path may support a USD/JPY fall through 143.

Expert Views on the US Labor Market

Arch Capital Global Chief Economist Parker Ross remarked on the New York Fed’s latest Labor Market Survey, stating,

“Key Takeaway: There is growing concern about job loss and a corresponding decline in workers expecting to move to a new employer, particularly among workers aged 45 and under. The results of this survey are yet another reflection of how concerned consumers are about the labor market, even as the Fed has only recently declared it “balanced.”

A deteriorating US labor market may give the doves the upper hand, possibly supporting a more aggressive 50-basis point September rate cut.

Short-term Forecast: Bearish

USD/JPY trends will depend on trade data from Japan, upcoming services PMIs (Thurs), and central bank forward guidance. Positive data from Japan and support for a Q4 2024 BoJ rate hike could pull the USD/JPY below 143.  Weak data from the US and rising bets on a 50-basis point September Fed rate cut may signal a fall toward 140.

Investors should remain alert. Monitor real-time data, central bank insights, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

The USD/JPY sat well below the 50-day and 200-day EMAs, confirming the bearish price trends.

A USD/JPY breakout from the 145.891 resistance level would support a move toward 147.500. A return to 147.500 could give the bulls a run at the 148.529 resistance level and the trend line.

Economic indicators from Japan, the FOMC Meeting Minutes, and central bank commentary require consideration.

Conversely, a drop below 145 could give the bears a run at the 143.495 support level. A fall through the 143.495 support level may bring the 141.032 support level into play.

The 14-day RSI at 31.65 suggests a USD/JPY break below 145 before entering oversold territory.

• The Japanese yen has appreciated to the vicinity of 145 yen against the US dollar, reaching its highest levels in about two weeks due to the weakening US dollar and increased expectations of monetary policy easing by the Federal Reserve.
• Last week, Chicago Fed President Austan Goolsbee said the US labor market and some leading economic indicators were flashing warning signs, citing rising credit card delinquency rates.

Domestically, investors absorbed economic data showing that Japan’s machinery orders, an indicator of capital spending, rose 2.1% month-on-month in June, exceeding expectations of a 1.1% increase. Markets are now looking to Japanese inflation figures later this week for clarity on the Bank of Japan’s monetary policy path. Overall, the Japanese yen (JPY) has risen against the US dollar (USD) for the second consecutive day, driven by hawkish sentiment surrounding the Bank of Japan (BoJ) and growing geopolitical tensions. Stronger-than-expected growth in Japan’s GDP in the second quarter has fueled expectations that the BoJ may consider raising interest rates in the near term, contributing to the yen’s appreciation.

According to the economic calendar results, data last week showed that Japan’s economy expanded by 0.8% on a quarterly basis in the second quarter, after contracting by 0.6% in the first quarter and beating expectations by 0.5%. On an annual basis, the economy grew by 3.1% in the second quarter, reversing from a 2.3% decline in the first quarter and beating expectations for a 2.1% growth.

On the stock trading platforms, Japanese stocks fall on profit-taking. According to Monday’s trading, the Nikkei 225 index of Japanese shares fell 1.77% to close at 37,388 points, while the broader TOPIX index lost 1.4% to 2,641 points, ending a five-day advance amid profit-taking and as the rising yen pressured domestic stocks. Also, the strong Japanese yen hurts the earnings outlook for Japan’s export-dependent industries and discourages investors from borrowing in the currency to invest in higher-yielding assets.

Also, investors digested data showing that Japan’s machinery orders, a proxy for capital spending, rose 2.1% on-month in June, beating expectations for a 1.1% gain. According to the trading, the heavyweights in the index such as Disco Corp (-4.7%), Tokyo Electron (-3.1%), SoftBank Group (-2.1%), Toyota Motor (-3.1%), and Fast Retailing (-2.6%) witnessed significant losses.

USD/JPY Technical Analysis and Expectations Today

According to the performance on the daily chart, the USD/JPY price returned to its broader downward path. Technically, breaking the support of 144.00 will support the next stronger downward move towards the psychological support of 140.00, and before that. Also, the technical indicators will move towards strong oversold levels. On the other hand, and over the same period of time. furthermore, the psychological resistance of 150.00 will remain an important element for bulls to advance further. Ultimately, the USD/JPY pair may remain in its current bearish range until markets and investors react to the announcement of the minutes of the last US Federal Reserve meeting and what will be said by global central bank officials at the Jackson Hole symposium.

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US Dollar vs Japanese Yen Technical Analysis

The US dollar has gone back and forth against the Japanese yen during the trading session on Tuesday, as we are trying to sort out what direction we are heading. That being said, I think this is a market that will continue to be very noisy, but I also recognize that we are in the midst of trying to determine whether or not the carry trade can come back or if it’s dead and gone. Ultimately, I do think the next few days will probably be more of the sideways chop that we have seen, so I’m not looking for much, but there are a couple of levels that I am paying close attention to.

If we can break above the 150 yen level, then I think you have the possibility of seeing this pair go much higher, perhaps reaching the 152 yen level followed by the 155 yen level. If we break down from here, then the 144 yen level will be support. Anything below there, then it starts to get somewhat dicey for the greenback. It’s worth noting that the US dollar is selling off against almost everything at the moment.

So, the fact that we can even hold our ground here is probably a good sign, but it’s still a bit early to make any major distinctions on that. I think we have sideways action ahead of us, but once we break out of this area and pass one of those levels, we should see this market really start to pick up momentum.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

More From FXEMPIRE:

• At the start of this week, the GBP/USD currency pair jumped close to the psychological resistance of 1.3000, reaching its highest level in a month.
• This was as signs of economic resilience and moderate inflation led traders to expect fewer interest rate cuts from the Bank of England compared to the US Federal Reserve.
• Traders expect a 44-basis-point interest rate cut from the Bank of England this year, with a 39% chance of a 25-basis-point cut in September.

For the US Federal Reserve, a 25bp cut in September is fully priced in, with a 24.5% chance of a larger 50bp cut and more than 90bp of easing expected by the end of the year. This week, attention turns to the Fed’s Jackson Hole symposium, where US central bank chairman Jerome Powell will speak on Friday, and in the UK, investors await the PMI readings and consumer confidence data from GfK.

On the electronic trading front, UK 10-year gilt yield hovers at a one-week high. By performance, the UK 10-year gilt yield was little changed, at a one-week high of 3.95%, as financial markets await US Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole symposium. In the UK, attention is focused on the upcoming PMI readings and GfK consumer confidence data. Economic resilience and moderate inflation have led traders to expect a smaller rate cut from the Bank of England than from the Fed.

Currently, Traders expect a 44bp rate cut from the BoE this year, with a 39% chance of a 25bp cut in September. For the Fed, a 25bp cut in September is fully priced in, with a 24.5% chance of a 50bp cut and more than 90bp of easing expected by the end of the year.

According to reliable trading platforms, the GBP/USD exchange rate has rebounded strongly from its early August losses, but both charts and economic fundamentals are consistent in indicating that further gains may remain possible in the future. Technically, the pound has regained multiple key levels on the charts against the US dollar last week in an extended rebound from its early August lows, including its 200-week moving average at 1.2845, and a 50% Fibonacci retracement of its July decline at 1.2857, and a 61.8% retracement of the same downward trend at 1.2901.

Nonetheless, it may have room to reclaim more lost ground, in part because US producer and consumer price figures last week suggested that more deflation was brewing, and with July retail sales figures and Thursday’s jobless claims data dampening concerns about the risk of a US or global recession.

Technical forecasts for the GBP/USD pair today:

According to the daily chart performance, the GBP/USD exchange rate is shown over daily periods with selected moving averages and black trendlines indicating a narrow symmetrical triangle, which indicates potential areas of technical support. While Fibonacci retracements of the July downward trend highlight potential technical resistances. With the UK’s economic story not playing a significant role, if any, in the heavy selling seen in the GBP/USD pair in late July and early August. Moreover, with the international issues that caused it currently receding, there may be room for the pound to rise further in the near term and possibly to the 78.6% retracement level of the July decline at 1.2965 or even higher.

This would highlight the year-to-date high at 1.3047, which is the last defense of the highest level recorded in July 2023 at 1.3145. furthermore, any breakthrough above this level in the near or medium term would indicate a continuation of the longer-term recovery from the September 2022 lows that stalled last summer.

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• The Canadian dollar rallied as risk sentiment improved.

• Economists expect Canada’s inflation to ease from 2.7% to 2.5% in July.

• Traders will focus on Powell’s speech at the end of the week for guidance on the Fed’s policy outlook.

The USD/CAD price analysis leans South as the Canadian dollar trades near a five-week high amid improved risk sentiment. At the same time, investors are awaiting Canada’s inflation report, which could shape the outlook for BoC rate cuts. 

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The Canadian dollar rallied on Tuesday, making new highs as risk sentiment improved. The loonie gained with US equities due to optimism about the US economy. Last week, data dismissed fears that the US economy was on the verge of a recession. At the same time, Fed rate cut expectations improved the outlook for the economy, supporting Wall Street and the Canadian dollar. 

Meanwhile, investors eagerly await Canada’s inflation report for more clues on the Bank of Canada’s rate cut outlook. Economists expect inflation to ease from 2.7% to 2.5% in July. The Bank of Canada has already implemented two rate cuts. If inflation continues cooling, the central bank might cut again in September. 

On the other hand, the US dollar was weak as markets increasingly bet on a Fed rate cut in September. Inflation figures last week met expectations, showing a gradual decline to the Fed’s 2% target. As such, policymakers might be ready to signal a rate cut in September. 

Traders will focus on Powell’s speech at the end of the week for guidance on the Fed’s policy outlook. Additionally, the FOMC meeting minutes will show policymakers’ stance on rate cuts and inflation.

USD/CAD key events today

• Canada CPI m/m
• Canada median CPI y/y
• Canada trimmed CPI y/y

USD/CAD technical price analysis: Strong bearish momentum heads for 1.3601 support

On the technical side, the USD/CAD price has fallen sharply after retesting the 30-SMA and breaking below the 1.3700 support level. The 30-SMA sits well above the price and points down, indicating a steep downtrend. Meanwhile, the RSI has fallen below 30 into the oversold region. 

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Given the solid bearish bias, the decline might soon challenge the 1.3601 support level. If the level holds firm, the price will pull back to retest the 30-SMA or its bearish trendline. On the other hand, if the level gives way, USD/CAD will make new lows, continuing the downtrend.

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