On Thursday, the USDJPY currency pair is moderately recovering from the five-month low reached during yesterday's trading session. It happened after US Federal Reserve System Chair Jerome Powell's statement about a possible interest rate cut in September. Moreover, on Wednesday, the Bank of Japan raised its interest rates to the level of 0.25% not seen in the past 15 years. As the regulator's representatives pointed out, the bank is ready to consider further rate hikes depending on economic conditions, despite current challenges.
According to Powell's statement yesterday, an interest-rate cut could come as soon as September if the US economy corresponds to the forecasts. It indicates a possible conclusion to more than two years of fighting inflation despite the country's heated presidential election campaign.
Market attention is now shifting to Friday's upcoming US employment report.
While the Fed is adjusting to monetary policy easing, the Bank of Japan switches to its normalization. It implies synchronization of economic strategies after a long period of divergence.
Meanwhile, official data from the Ministry of Finance released on Wednesday showed that Japanese authorities spent 5.53 trillion yen ($36.8 billion) this month to intervene in the foreign exchange market to prevent the Japanese currency from falling to a 38-year low. As a result, USDJPY has fallen 5.7% over the year.
At the technical level, the USDJPY currency pair quotes showed an acceleration of the downtrend after exiting the uptrend on the D1 timeframe. The Bulls Power and Bears Power indicators point to a potential rate decline. This is confirmed by the absence of signals of the current trend change.
Signal:
The short-term outlook for the USDJPY currency pair is to sell.
The target is at the level of 141.70.
Part of the profit should be fixed near the level of 146.50.
The Stop loss could be placed at the level of 155.60.
The bearish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.
This content is for informational purposes only and is not intended to be investing advice.
