- The yen is heading for a month-to-month acquire of 5%.
- The Financial institution of Japan raised charges by 25bps.
- Traders are cautious forward of the Fed coverage assembly.
The USD/JPY forecast reveals elevated bearish sentiment because the yen surged after the Financial institution of Japan raised rates of interest. On the identical time, Japan’s central financial institution introduced plans to cut back its large financial stimulus. In the meantime, buyers have been making ready for the Fed coverage assembly.
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The yen is heading for a month-to-month acquire of 5%. The latest rally got here after the BoJ hiked charges on Wednesday, tightening its financial coverage. Japan’s charges at the moment are at 0.25%, that means the coverage divergence between the BoJ and the Fed is shrinking.
The yen’s rally in July was brought on by a number of components. First, the Financial institution of Japan intervened within the markets by shopping for the yen and promoting the greenback, leading to a short enhance in demand for the yen.
Second, there was extra hypothesis a couple of doable charge hike on the finish of the month. Consequently, buyers began pricing in increased charges even earlier than the coverage assembly. Because it seems, the BoJ didn’t disappoint.
Third, markets hoped the BoJ would announce plans to cut back its bond purchases. Nonetheless, the precise figures got here in decrease than anticipated. The central financial institution expects to halve its bond purchases by the primary quarter of 2026.
Elsewhere, there was warning forward of the Fed coverage assembly. The US central financial institution will probably preserve rates of interest unchanged. Nonetheless, merchants hope policymakers will sign the primary charge minimize in September.
USD/JPY key occasions in the present day
- BOJ Press Convention
- US ADP non-farm employment change
- US Employment Price Index q/q
- US pending dwelling gross sales m/m
- FOMC coverage assembly
USD/JPY technical forecast: Bears take cost after bearish engulfing candle
On the technical aspect, the USD/JPY worth has all of a sudden shifted from bullish to bearish. Initially, bulls took cost by breaking above the 30-SMA. Nonetheless, they did not breach the 154.80 key stage. Right here, the worth made a bearish engulfing candle, indicating a looming reversal.
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The worth fell again beneath the 30-SMA, and the RSI entered the oversold area. After the reversal sample, bears took over and broke beneath the 152.01 help stage. Consequently, the worth has made a decrease low. If this bearish pattern continues, the worth will quickly take out the 150.02 stage.
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