The move represents a sharp reversal from the yen's weakness earlier in the summer, when the USD/JPY approached 165 and forced **** anese authorities to intervene in the foreign-exchange market.
The latest appreciation is increasingly being driven by expectations that the Bank of **** an (BoJ) is preparing to raise interest rates at its September meeting, while investors are also reassessing the outlook for US monetary policy. The BoJ is scheduled to meet next Thursday and Friday, with markets now pricing in a high probability of a 25-basis-point increase. More importantly, investors will be looking for guidance on whether the central bank could accelerate the pace of subsequent tightening.
U.S. consumer-price data due on Friday will provide an important signal ahead of the Federal Reserve's September 15-16 meeting. The inflation figures have become particularly significant because the Fed's policy outlook remains unusually divided. Governor Christopher Waller has indicated that he could support keeping rates unchanged if inflation continues to moderate, while Fed Chair Kevin Warsh has stressed that insufficient progress on inflation could warrant tighter policy.
From a technical perspective, the weekly chart points to a clear deterioration in the USD/JPY trend. The pair has broken below its ascending trend structure and is trading beneath both the Tenkan-sen and Kijun-sen lines of the Ichimoku Cloud index. This suggests that the medium-term bullish structure has weakened. The weekly RSI has also fallen below the neutral 50 threshold and is moving lower, indicating that bearish momentum is becoming more established.
The fundamental backdrop is becoming increasingly challenging for the USD/JPY bulls because the interest-rate differential that supported the yen carry trade for years is gradually narrowing.
#Friday #rates
The latest appreciation is increasingly being driven by expectations that the Bank of **** an (BoJ) is preparing to raise interest rates at its September meeting, while investors are also reassessing the outlook for US monetary policy. The BoJ is scheduled to meet next Thursday and Friday, with markets now pricing in a high probability of a 25-basis-point increase. More importantly, investors will be looking for guidance on whether the central bank could accelerate the pace of subsequent tightening.
U.S. consumer-price data due on Friday will provide an important signal ahead of the Federal Reserve's September 15-16 meeting. The inflation figures have become particularly significant because the Fed's policy outlook remains unusually divided. Governor Christopher Waller has indicated that he could support keeping rates unchanged if inflation continues to moderate, while Fed Chair Kevin Warsh has stressed that insufficient progress on inflation could warrant tighter policy.
From a technical perspective, the weekly chart points to a clear deterioration in the USD/JPY trend. The pair has broken below its ascending trend structure and is trading beneath both the Tenkan-sen and Kijun-sen lines of the Ichimoku Cloud index. This suggests that the medium-term bullish structure has weakened. The weekly RSI has also fallen below the neutral 50 threshold and is moving lower, indicating that bearish momentum is becoming more established.
The fundamental backdrop is becoming increasingly challenging for the USD/JPY bulls because the interest-rate differential that supported the yen carry trade for years is gradually narrowing.
#Friday #rates
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