• Investors are speculating ahead of key speeches from top Fed and Bank of Japan policymakers.

• Markets imply an over 70% chance of a 25-bps September Fed rate cut.

• A Reuters poll on Wednesday revealed that most economists expect the BoJ to raise rates again this year. 

The USD/JPY price analysis is slightly bullish as the dollar recovers ahead of the FOMC policy meeting minutes. At the same time, investors are speculating ahead of crucial speeches from top Fed and Bank of Japan policymakers.

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The US dollar has fallen since the beginning of the week as traders fully priced in a Fed rate cut at the September meeting. However, consumer inflation increased moderately in July, reducing bets of a 50-bps rate cut. Nevertheless, there is an over 70% chance of a smaller 25-bps cut. 

Traders are on the edge, waiting to see whether policymakers will support this outlook. The FOMC minutes will show how officials decided to hold rates at the last meeting and their confidence levels with the progress on inflation.

Experts believe the market is highly dovish. Therefore, any signs that policymakers are less dovish could benefit the dollar. Powell will speak on Friday at the Jackson Hole symposium. Investors will listen keenly for hints on the size and pace of future rate cuts. If he sounds cautious or less dovish than expectations, it could trigger a rally in the dollar. 

Meanwhile, Bank of Japan Governor Kazuo Ueda will also speak on Friday. Markets will wait to see if he signals another rate hike and supports the yen. A Reuters poll on Wednesday revealed that most economists expect the Bank of Japan to raise rates again this year. 

USD/JPY key events today

USD/JPY technical price analysis: Bears struggle to detach from 0.382 Fib resistance

On the technical side, the USD/JPY price is recovering after making a new low. However, the bearish bias remains intact, with the price below the 30-SMA and the RSI under 50. Bears recently broke below the 0.382 Fib level. 

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The price is now trying to detach from this level but keeps pulling back. If bears regain momentum, USD/JPY will likely collapse to the 142.56 support level. On the other hand, if bulls take control with a break above the 30-SMA, the price might rally to the 150.03 resistance level.

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• Fed policymakers have gradually gained confidence that inflation will reach 2%.

• Markets are pricing a 50-bps or 25-bps rate cut in September.

• On Tuesday, ECB’s Olli Rehn said that the central bank should cut rates in September.

The EUR/USD forecast shows increased bullish momentum as the dollar extends its decline against the euro amid increased Fed rate cut expectations. The euro rose despite an ECB official calling for the central bank to cut rates in September.

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The euro has surged recently as investors fully priced in September’s first Fed rate cut. Initially, ECB policymakers had been more dovish than the Fed. Consequently, the ECB was among the first central banks to cut interest rates. Since then, policymakers have taken a cautious tone as inflation has stalled. 

Meanwhile, Fed policymakers have gradually gained confidence that inflation will reach 2%. At the same time, markets are pricing a 50-bps or 25-bps rate cut in September. However, there is a higher chance the Fed will implement the smaller cut. The US economy has slowed down significantly. However, like last week’s retail sales report, there are still pockets of strength. Consequently, the Fed might opt for a more gradual pace of rate cuts.

Meanwhile, ECB’s Olli Rehn said on Tuesday that the central bank should cut rates in September due to the recent weakness in the Eurozone economy. He became one of the first officials to clearly guide the future. Economists believe the European Central Bank will cut rates in September and December. 

Market participants eagerly await the Fed minutes for more guidance on the rate cut outlook. Furthermore, Powell’s speech on Friday will likely increase market volatility.

EUR/USD key events today

EUR/USD technical forecast: Bears could return after the solid rally

On the technical side, the EUR/USD price is in a well-developed bullish trend. The price has made a series of higher highs and lows. At the same time, it has respected the 30-SMA as support, bouncing higher every time it revisits the line. Meanwhile, the RSI trades in the overbought region, indicating massive bullish momentum.

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The price recently broke above the 1.1050 resistance level. Bulls are now eyeing the next hurdle at the 1.1150 level. However, the price has been on a solid move without pausing. Therefore, bears might soon overpower bulls to retest the 30-SMA before the uptrend continues.

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• USD/JPY rebounds from a two-week low amid some intraday USD short-covering move.
• The divergent Fed-BoJ policy expectations should keep a lid on any meaningful upside. 
• Investors look to FOMC minutes for some impetus ahead of Powell’s speech on Friday.

The USD/JPY pair shows some resilience below the 145.00 psychological mark and staged a goodish intraday recovery from a two-week low touched earlier this Wednesday. Spot prices, for now, seem to have snapped a three-day losing streak, albeit struggled to capitalize on the move and remained below the 146.00 mark through the first half of the European session. The Japanese Yen (JPY) started losing traction after data released earlier today showed that Japan’s trade deficit ballooned to ¥621.84 billion in July amid disruptions in manufacturing output that led to a smaller-than-expected rise in exports. This overshadowed a 16.6% jump in imports, which pointed to improving domestic demand. 

Furthermore, the political uncertainty fueled by Japanese Prime Minister Fumio Kishida’s decision to step down could pause the Bank of Japan’s (BoJ) plan to raise interest rates. This further seems to undermine the JPY, which, along with a modest US Dollar (USD) rebound from its lowest level since January, acts as a tailwind for the USD/JPY pair. The USD uptick, meanwhile, could be attributed to some short-covering ahead of the July FOMC meeting minutes, due later today. Apart from this, Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday will be scrutinized for cues about the central bank’s rate cut path and some meaningful impetus.

In the meantime, growing acceptance that the Fed will begin its policy easing cycle soon amid cooling inflation should keep a lid on the attempted USD recovery and cap the USD/JPY pair. Fed Governor Michelle Bowman tried to temper expectations of a near-term rate cut and said that despite the recent progress, price growth levels remain well-elevated and still uncomfortably above the central bank’s 2% goal. The markets, however, are still pricing in just over a 70% chance that the US central bank will cut rates by 25 basis points (bps) in September.  Moreover, a Reuters poll showed that a slim majority of economists expect the Fed to cut rates by 25 bps at each of the remaining three meetings of 2024. 

The dovish outlook keeps the US Treasury bond yields depressed, which might hold the USD bulls from placing aggressive bets. Meanwhile, investors seem convinced that an improving macroeconomic environment in Japan should encourage the BoJ to raise interest rates again later this year. This, along with persistent geopolitical risks and a slight deterioration in the global risk sentiment, should help limit any meaningful JPY downfall. Hence, it will be prudent to wait for strong follow-through buying before confirming that the USD/JPY pair has bottomed out and positioning for any meaningful appreciating move in the near term. 

Technical Outlook

From a technical perspective, this week’s breakdown below the 200-hour Simple Moving Average (SMA) and the USD/JPY pair’s inability to build on the intraday bounce beyond the 23.6% Fibonacci retracement level the recent fall since last Friday warrant caution for bulls. Moreover, oscillators on the daily chart are holding deep in negative territory and have also recovered from the oversold zone, suggesting that the path of least resistance for spot prices is to the downside. 

Hence, any subsequent move up could face stiff resistance near the 146.65 region or the 38.2% Fibo. level. The momentum could extend further beyond the 147.00 mark, though is likely to remain capped near the 147.15 confluence hurdle – comprising the 50% Fibo. level, 100 and 200-hour SMAs. The latter should act as a key pivotal point, which if cleared decisively should pave the way for additional gains towards the 147.70 region, or the 61.8% Fibo. level, en route to the 148.00 round figure.

On the flip side, immediate support is pegged near the 145.45-145.40 area ahead of the 145.00 psychological mark. A convincing break below will be seen as a fresh trigger for bearish traders and drag the USD/JPY pair to the next relevant support near the 144.20-144.15 region. Some follow-through selling below the 144.00 round figure should pave the way for a slide towards the 143.60 intermediate support en route to the 143.00 mark.

USD/JPY 1-hour chart

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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EUR/USD Current price: 1.1083

• The persistent upbeat mood maintains the US Dollar under strong selling pressure.
• Financial markets welcome stable macroeconomic data and an upcoming rate cut.
• EUR/USD is technically overbought but can reach higher highs in the near term.

The EUR/USD pair keeps reaching fresh 2024 highs, approaching the 1.1100 mark during European trading hours. An upbeat mood and the market’s conviction that the Federal Reserve (Fed) will pull the trigger in September put pressure on the US Dollar.  As the date looms, global equities accelerate its momentum, with Asian and European indexes posting substantial gains, reflecting the optimistic sentiment.

Meanwhile, Germany released the July Producer Price Index (PPI), which rose 0.2% MoM while declining by 0.8% from a year earlier, in line with the market’s expectations. Additionally, the Eurozone confirmed that the Harmonized Index of Consumer Prices (HICP) rose 2.9% YoY in July. Finally, the EU reported that the June Current Account posted a seasonally adjusted surplus of €51 billion.  The figures had no impact on the Euro.

The American session will bring no United States (US) data, although some Fed members will be on the wires. Should they pave the way for a September interest rate cut, the most likely outcome is additional USD weakness.

EUR/USD short-term technical outlook

From a technical point of view, EUR/USD bullish route seems poise to continue. The daily chart shows that the pair extends its advance beyond all its moving averages, with the 20 Simple Moving Average (SMA) heading north almost vertically far below the current level while above the longer ones. Technical indicators, in the meantime, have lost their directional momentum and consolidate within overbought levels, not giving any other sign of upward exhaustion.

The 4-hour chart shows bulls maintain the pressure in the near term. The Relative Strength Index (RSI) indicator aims marginally higher at around 75, while the Momentum indicator consolidates as the pair hovers below its intraday high. Still, moving averages are clearly bullish, well below the current level, in line with buyers’ continued pressure.

 Support levels: 1.1050 1.1020 1.0985  

Resistance levels: 1.1090 1.1120 1.1160

• The British pound has rallied again during the trading session on Monday as it looks like we are threatening the 1.30 level.
• The 1.30 level is a large round psychologically significant figure and therefore I think it does make a certain amount of attention seeking traders pay attention to this pair.
• After all, there are a lot of options barriers at these large, round, psychologically significant figures, and therefore a lot of people will look at this through the prism of whether or not people are going to be aggressive.

Short-term pullbacks will almost certainly be buying opportunities and I think that the 1.2850 level underneath is massive support Furthermore, you also have the 50-day EMA racing towards that area So I think it all ties together for a potential pullback and then bounce That being said if the market were to break above the 1.3050 level then the market could continue to go higher. Having said that we are a little overstretched at this point and it looks to me like it’s a situation where we probably need to find value hunters underneath.

We Will Continues to See Noise

All things being equal, this is a market that continues to be noisy and that will be the case going forward as traders around the world continue to worry about what’s going to happen with central banks. Furthermore, we are in the midst of getting ready for the Jackson Hole Symposium, and that will have speeches from both the head of the Federal Reserve and the head of the Bank of England.

So that could throw this pair into a little bit of disarray as well. I do think we’re overdone, and I do think that we pull back, but I don’t necessarily think that it’s going to end up being a shorting opportunity. Rather, I think you probably get a chance to buy the pound at a lower price if you’re just patient enough. That being said, it’s very difficult to time this move, but I certainly think that you will get an opportunity to pick up British pounds “on the cheap.”

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