USDJPY is moving in Ascending channel and market has reached higher low area of the channel
The Japanese Yen: What’s Happening and Why It Matters
The Japanese Yen (JPY) has been on quite a rollercoaster recently. Last week, it surged by about 2% due to suspected intervention by Japanese authorities. But now, it’s extending its losses, leaving traders on edge. What’s going on with the Yen? Why does it matter? Let’s dive into the details.
Authorities’ Intervention: A Closer Look
Why Did Authorities Step In?
Last Thursday, it’s estimated that Japanese authorities spent between ¥3.37 trillion and ¥3.57 trillion to support the JPY. This intervention was likely an effort to curb the rapid depreciation of the Yen. But why did they need to do this in the first place?
The Role of the Bank of Japan (BoJ)
The Bank of Japan (BoJ) has been monitoring the Yen closely. With the currency showing significant volatility, it seems the BoJ decided to act. This kind of intervention is not common but is sometimes necessary to stabilize the economy.
The US Dollar’s Strength Amid Global Tensions
While the Japanese Yen is struggling, the US Dollar (USD) has been strengthening. One key reason for this is the rising risk aversion triggered by global events, such as the attempted assassination of former US President Donald Trump. This incident has caused uncertainty, which often drives investors towards the safety of the USD.
USDJPY is moving in Ascending channel
Impact of US Inflation and Fed Policies
Cooling US inflation has also played a role. The lower inflation rates have strengthened bets on a Federal Reserve rate cut in September. According to the CME Group’s FedWatch Tool, there’s now an 85.7% probability of a 25-basis point rate cut at the next Fed meeting.
What Influences the Japanese Yen and US Dollar?
Fed Chair Jerome Powell’s Insights
Fed Chair Jerome Powell recently mentioned that inflation is on course to meet the Fed’s target sustainably. This suggests that we might see interest rate cuts in the near future, which could impact the USD and, by extension, the JPY.
Comments from Other Key Figures
- Mary Daly, President of the San Francisco Fed: Daly stated that inflation is cooling down in a way that bolsters confidence in reaching the 2% target. However, she also mentioned that more data is needed before making any rate decisions.
- US President Joe Biden: Biden addressed the nation, condemning political violence and calling for unity. His comments, though more politically focused, also play into the broader context of economic stability and investor confidence.
Market Observations and Expert Opinions
Francesco Pesole from ING
Pesole, an FX analyst at ING, noted that Japan’s Ministry of Finance has adjusted its FX intervention strategy. Following a softer US CPI print, the USD/JPY pair dropped significantly, indicating that interventions are having some effect.
USDJPY is moving in Ascending channel and market has rebounded from the higher low area of the channel
UBS FX Strategists
UBS strategists highlighted that speculative investors are holding near-record short positions on the Yen. This means there’s a lot of betting against the Yen, but if US economic data continues to suggest a soft landing, the USD/JPY could see some pullbacks.
BBH FX Strategists
Strategists at BBH pointed out that recent softness in US data challenges the notion of sustained inflation and strong growth in the US. They expressed concerns about weaknesses in the labor market, which could influence future Fed decisions and, consequently, the USD/JPY dynamics.
Japanese Government’s Stance
Chief Cabinet Secretary Yoshimasa Hayashi
Hayashi stated his readiness to employ all available measures regarding forex. He expects the BoJ to take appropriate actions to achieve a sustainable 2% price target.
Finance Minister Shunichi Suzuki
Finance Minister Suzuki emphasized that rapid foreign exchange movements are undesirable. While he refrained from commenting directly on FX intervention, his stance suggests a cautious approach to handling the Yen’s volatility.
Summary
The Japanese Yen’s recent fluctuations are a result of multiple factors, including government intervention, global events, and economic policies. Authorities in Japan have spent significant amounts to stabilize the Yen, while the US Dollar’s strength amid global tensions and cooling inflation has influenced the market dynamics. Insights from key figures like Jerome Powell and Mary Daly, along with expert opinions, provide a comprehensive view of the current situation.
Understanding these elements can help traders and investors make informed decisions in a volatile market. As always, staying updated with the latest news and expert analyses is crucial for navigating the ever-changing landscape of forex trading.
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