USDJPY:
The Japanese yen (JPY) reached a nearly two-week high against the US dollar after the publication of the minutes of the Bank of Japan’s (BoJ) June meeting, which confirmed expectations of an imminent interest rate hike before the end of the year. In addition, the rise in Japan’s services business activity index was another factor that contributed to the yen’s moderate gains during Tuesday’s Asian session. However, the JPY is struggling to attract further buying amid concerns that domestic political uncertainty and signs of slowing inflation in Japan could complicate the BoJ’s policy normalization process.
In addition, optimistic market sentiment is limiting the Japanese yen’s rise as a safe-haven currency. This, along with some buying of the US dollar (USD), is helping the USD/JPY pair rebound 35-40 points from its daily low and rise above the 147.00 mark in the last hour. Meanwhile, traders are pricing in a higher probability that the Federal Reserve (Fed) will cut interest rates in September. This is significantly at odds with Japan’s expectations, which are hawkish, and should be a favorable factor for the lower-yielding Japanese yen. In addition, rising bets on an Fed rate cut should limit the rise of the US dollar and the currency pair.
Trade recommendation: SELL 147.80, SL 148.60, TP 146.50
Origin: FreshForex
