Japanese yen hotspots
USD / JPY will give a prepayment from the beginning of the week during a larger – than – expected downturn in the US Consumer price index (CPI), but the market reaction may end in the short term as US Treasury interest rates remain stable.
USD / JPY trades in August as US Treasury returns remain
At the same time, the main CPI fell from 4.3% to 4.0% over the same period, marking the lowest level since May, but recent data may encourage the Federal Reserve to gradually reduce its financial support as it strengthens central bank expectations of a temporary rise in inflation.
As a result Federal Open Market Committee (FOMC) may amend the guidelines in its next interest rate decision on 22 September The chairman Jerome Powell admitdthat the central bank could change gears“If the economy develops broadly as expected, ”And it remains to be seen whether Fed officials will do so implement significant changes Summary of Economic Forecasts (SEP) like the Commission warns that “The growing number of COVID-19 cases associated with the spread of the Delta variant could lead to delays in returning to work and school and slow down the economic recovery.“
In the meantime, the USD / JPY may continue to monitor the August range, as speculation about a looming change in Fed policy will keep US yields afloat, but further exchange rate consolidation may support retail sales, as it did last month.
The IG customer feelings report shows 49.85% of traders are now net length USD / JPY where the relationship between traders is short and long standing 1.01 to 1 p.m.
The number of traders in net length is unchanged from yesterday and 5.77% lower than last week, while the number of traders is short 2.22% higher than yesterday and 1.17% higher than last week. The decline in the long net position is due to the USD / JPY struggle fights for the expansion of recent high and low series, while the rise in net short – term interest rates did not help crowd out, as 42.89% of traders were online in pairs last week.
With this in mind, the USD / JPY may face range conditions during mixed US data printouts before the FOMC interest rate decision, but speculation about a looming change in Fed policy may keep the exchange rate and Treasury yields. Chairman Powell and Co. show a greater willingness to change gears.
USD / JPY daily schedule
Source: Trading View
- Keep in mind that the USD / JPY denied the risk of head and shoulder formation as it rose to a new year’s high in July (111.66). Relative Strength Index (RSI) offering a similar development as it showed an upward trend during the same period.
- However, the RSI has risen as the USD / JPY struggled to hold the SMA for more than 50 days (109.92), with the exchange rate remaining within a narrow range when the moving average struggles to maintain a positive slope.
- USD / JPY may continue to follow sideways with a 50-day SMA (109.92), but there is no momentum to keep Fibonacci overlap 109.40 (50% repeat) to 110.00 (78.6% expansion) bringing the radar to its lowest in August (108.72).
- To open the highest level in August (110.80), you need a break that exceeds the monthly peak (110.45), with the next area of interest coming around 111.10 (61.8% expansion) to 111.60 (38.2% again).
– Written by David Song, currency strategist
Follow me on Twitter at @DavidJSong