USD/JPY Cautious Ahead of the Fed & BoJ Policy Decisions

  • USDJPY
    (${instrument.percentChange}%)

USD/JPY Analysis

The USDOLLAR is having a bad month, as signs of cooling and a sharp CPI inflation deceleration have shifted investor focus to the timing for rates cuts, with CME's FedWatch Tool assigning the highest probability of such a move within Q1 of 2024. More to it, markets expect a hike next week, but view it as one-and-done. [1]

However, the greenback's slump appeared excessive and managed ro rebound last week. Markets have been overly optimistic before around the inflation progress and prospects of a Fed reversal. The labor market is still tight, while the US economy grew more than estimated in Q1.

The Bank of Japan is on the other side of the policy spectrum, but expectation for normalization mount. The accounts of the last meeting had shown some support for a revision of the yield curve control (YCC). Although inflation (ex-fresh food) is off its peaks, it ticked up to 3.3% in June, according to Friday release.

However, Governor Ueda has repeatedly poured cold water to hopes of an exit of the ultra-loose policies and 77% of economists in a Reuters poll, don't anticipate a YCC change on the upcoming meeting. [2]

Trade the News: View our Economic Calendar

After the recent slump due to optimism for a less aggressive Fed and a change by the BoJ, the latest developments led USD/JPY to the best week of the year. This brings the high that spraked the japanese intervention of 2022 (145.90)in the spotlight, but strong catalyst would be needed for gains past that.

Japanese authorities have already supported the Yen verbally and further gains may spark further comments and potentially action. USD/JPY is facing difficulties today and this creates risk for pressure towards the lows of the month (137.22), but the downside contains multiple roadblocks.

Investors may stay on the sidelines ahead of the pivotal decisions by the Fed (Wednesday) and the Bank of Japan (Friday), the outcome of which will determine the pair's trajectory.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 24 Jul 2023 https://www.reuters.com/markets/asia/boj-wont-tweak-ycc-july-say-77-economists-2023-07-21/

2

Retrieved 18 Jun 2024 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}
Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.