USD/JPY extends gains as focus turns to Fed Chair Warsh’s speech
USD:
The US dollar has been mixed in the last couple of days, with traders
likely taking profits and hedging ahead of today’s Fed Chair Warsh speech at
Jackson Hole. He’s not expected to give forward guidance, but what traders will
be more focused on is whether he leans against the easing in financial
conditions following the Treasury buyback announcement and Bessent’s “verbal”
intervention to suppress long-term yields
If he doesn’t, the US dollar will likely come under renewed pressure from
further easing in financial conditions and the dovish repricing in near-term
interest rate expectations. On the other hand, if he pushes back saying things
like “recent easing in financial conditions, if sustained, could
complicate the process of returning inflation to our target" or “if
recent easing threatens progress toward price stability, we will not hesitate
to respond appropriately" and so on, the market may retighten financial conditions
and give the greenback a boost.
JPY:
On the JPY side, the
currency continues to stay under pressure due to lack of changes on the
fundamental side. The BoJ rate hike in September is largely priced in, so that’s
not going to change anything. The trend is unlikely to
change without a dovish repricing in Fed interest rate expectations or a faster
BoJ tightening pace.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPYhas been slowly recovering
ground after the intervention, with the first major target being the resistance
zone around the 160.50 level. If the price gets there, we can expect the
sellers to step in with a defined risk above the resistance to position for a
drop back into the 155.00 handle. The buyers, on the other hand, will look for
a break to increase the bullish bets into new cycle highs.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have
a minor support zone around the 158.50 level. If we get another pullback into
the support, we can expect the buyers to step in with a defined risk below it
to keep pushing into new highs. The sellers, on the other hand, will look for a
break to pile in for a drop into the 155.00 handle next.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have
an upward trendline defining the bullish momentum. The buyers will likely continue
to lean on the trendline with a defined risk below it to keep pushing into new
highs. The sellers, on the other hand, will look for a break to target a pullback
into the 158.50 support. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, all eyes will be
on Fed Chair Warsh’s speech at the Jackson Hole Symposium. The prepared remarks
are typically released either moments before or simultaneously as the Fed Chair
delivers his speech.
This article was written by Giuseppe Dellamotta at investinglive.com.