- USD/JPY – The short-term high may already be in place.
- EUR/JPY – UK jobs and growth data will likely drive this pair.
The Japanese Yen pushed higher in Asian trade after Bank of Japan governor Kazuo Ueda suggested that the central bank may start to shift away from its ultra-loose monetary policy if inflation begins to move to target. Governor Ueda said that the central bank may have enough data by the year-end to shift away from negative bond rates, adding that the central bank may have ‘underestimated’ the increase in inflation. Any shift away from the BoJ’s ultra-loose monetary policy, however minor, will leave the Japanese Yen vulnerable to a sharp move higher, especially after the currencies’ multi-month weakness against a range of G& peers.
USD/JPY is moving lower today, aided by both a mildly hawkish BoJ and a weaker US dollar. Over the weekend an article in The Wall Street Journal by closely-followed Fed-watcher Nick Timiraos suggested that the Federal Reserve will keep rates unchanged later this month and will take ‘a harder look at whether more (rate hikes) are needed’ in the coming months. There is now a Fed-speak blackout ahead of the September 20th FOMC meeting, leaving the US dollar vulnerable to further downside. Later this week, the release of the August US inflation report will drive price action going into this meeting.
USD/JPY sold off into the 20-day simple moving average in the Asian session before making a partial recovery to currently trade unchanged on the day. The cluster of recent highs around 147.87 look as though they will remain untested, in the short-term at least, ahead of Wednesday’s US CPI release. Support is seen at 145.06.
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USD/JPY Daily Price Chart – September 11, 2023
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Another Japanese Yen pair – EUR/JPY – will be driven by an overseas central bank as the European Central Bank (ECB) announces its latest policy decision on Thursday. The market is currently expecting the ECB to leave rates unchanged but the decision is close and a further 25 basis point hike cannot be ruled out. The daily chart also suggests that the pair have topped out just under 160 with the spot price now starting to move lower and below both the 20- and 50-day simple moving averages. A hawkish ECB on Thursday could see this pair re-test the 160 level.
EUR/JPY Daily Price Chart – September 11, 2023
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