- Gold declines while Silver, Palladium, Platinum and other metals increase in value.
- Bond yields improve but remain significantly lower than Monday’s open, indicating a definite rate cut in September.
- Predictions of rate cuts continue to support the stock market and Gold. Investors turn their attention to the FOMC Meeting Minutes for clearer indications!
- The US Dollar downward trend loses momentum after 3 days of strong declines.
USDJPY Analysis And Latest Developments
The USDJPY is largely being driven by the US Dollar which has fallen in value over the past week. This is due to lower inflation and poorer employment data in July. These two elements are contributing to the market pricing in an interest rate cut in September. According to experts, an interest rate adjustment for September is certain. However, the main price driver going forward will be whether the Federal Reserve will cut 25-basis points or 75-basis points.
There is a 70% possibility of a 25-basis point cut and a 30% chance of a 50-basis point cut according to the Chicago exchange. By the end of the year, the majority believe the Federal Reserve will have cut between 0.75% to 1.00%. Indications of larger and more frequent cuts are known to be negative to the US Dollar. Additionally, investors will also opt to increase exposure to the Yen as the US Dollar loses its safe haven and inflation-hedge credibility. The FOMC Meeting Minutes will help with this as investors hope the report will provide further insights.
Investors are waiting for the speech of the head of the US Fed, Jerome Powell, at the Economic Symposium in Jackson Hole, where he is expected to confirm the agency’s plans to reduce the interest rate by 25 basis points or immediately by 50 basis points at the September meeting.
USDJPY – Technical Analysis!
In terms of technical analysis, the price of the exchange rate is trading below the 75-Period EMA and 100-Period SMA. In addition to this, the price remains below the neutral level on the RSI. Therefore, the price in the medium term is largely obtaining signals pointing towards downward price movement. However, the price rose throughout the first two sessions of the day and the direction will need to change for a sell signal to arise. For example, if the price declines below 145.630 the moving averages will form a bearish crossover signaling a bearish price movement. According to the Fibonacci on the 2-Hour chart, sell signals are also possible if the price declines below 145.367.
A key price driver over the next 24 hours will largely be the FOMC Meeting Minutes, Services PMI, Manufacturing PMI and Friday’s Fed Speech at the Jackson Hole Symposium at 14:00 GMT. No news releases are due for Japan and the Japanese Yen, however, while the Yen has fallen 0.40% lower today, it has been regaining momentum over the past 2 hours.
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Michalis Efthymiou
Market Analyst
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