A new wave of the Japanese yen's weakness is possible

19 September 2023 170
A new wave of the Japanese yen's weakness is possible

Volatility in the USDJPY currency pair is shrinking and forming a triangle. The figure’s opening should happen this week on the background of upcoming events. The Federal Reserve’s meeting will take place tomorrow, on Thursday the Bank of England will hold its meeting, and on Friday the Bank of Japan will do the same.

Senior Market Analyst at OANDA Edward Moya confirms this opinion. According to him, the market becomes more and more focused on actions of central banks. As shown by the FedWatch Tool CME, almost all traders are confident that the U.S. central bank will keep interest rates at the current level in a range of 5.25% to 5.5%.

The Fed is unlikely to go against the market. However, the regulator's comments will remain quite tough as the U.S. economy is resilient and inflation started to rise again. 

The Core Consumer Price Index, which doesn't take into account food and energy prices, increased by 0.3% compared to July. It was its first acceleration in over six months. It should be noted that this indicator is the most important for the Fed in determining the monetary policy of the United States. Thus, after the meeting, the U.S. dollar may strengthen against all other currencies.

All 46 economists surveyed by Bloomberg believe the Bank of Japan will keep the policy unchanged at its next meeting on Friday.

Economists' expectations for Japan's monetary policy over the medium-term horizon remain hawkish. Moreover, Governor of the Bank Of Japan Kazuo Ueda recently mentioned a possibility of finishing a period of negative interest rates.

According to the latest polls, the rate will remain unchanged. In general, the market is expecting this exact scenario. However, the regulator's comments about the future policy change may be quite harsh. This may exert pressure on the Japanese yen.

In terms of technical analysis, the USDJPY currency pair has formed a triangle on the chart. The exit from this pattern will take place in the coming days. According to the market sentiment, this exit is likely to be upward.

Thus, the growth target will be at the level of 150. Stop-loss will be placed at exiting down from the figure and updating the price lows of the last trading sessions. This is the level of 146.9.

The USDJPY currency pair is likely to rise:

Take profit – 150,0

Stop-loss – 146,9

This content is for informational purposes only and is not intended to be investing advice.

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