USDJPY:
The pair has retreated from recent highs after comments by the Fed Chair and more even U.S. business indicators reduced the impulse for further dollar strength. Expectations of a gradual shift toward easier Fed policy limit the rise in U.S. yields—the key driver of USD/JPY—and open room for a downward correction in the pair.
From Japan, the Bank of Japan kept the short-term rate around 0.50% at its September meeting, with the board debating the possibility of further tightening and announcing steps to wind down parts of non-market support (ETF/REIT programs). For markets, this signals that Japan’s normalization course will continue, albeit very cautiously. Combined with fluctuations in risk appetite, this supports the yen’s role as a haven over the near term.
Risks to short positions include a jump in U.S. yields on unexpectedly strong data and any signs of delayed normalization in Japan. Even so, given the current information flow and expectations balance, the base case is trading below 148.00 with attempts to test the 147.00–147.10 area.
Trading recommendation: SELL 147.85, SL 148.35, TP 146.95
Origin: FreshForex
