Yen Surges On BoJ’s Hawkish Policy Shift

Fundamental Analysis

* Yen Frenzy: The Japanese Yen (JPY) is gaining strength against the dollar, influenced by expectations that the Bank of Japan (BoJ) will raise interest rates at its policy meeting next week. According to Reuters, Toshimitsu Motegi, a senior official in the ruling party, has called on the BoJ to clearly communicate its plans to gradually increase interest rates as part of normalizing monetary policy. Prime Minister Fumio Kishida also mentioned that normalizing the central bank’s monetary policy would support Japan’s transition to a growth-driven economy. Meanwhile, the dollar is under pressure due to rising speculation about a potential rate cut by the Federal Reserve in September. The CME Group’s FedWatch Tool indicates a 93.6% chance of a 25-basis point rate cut at the September Fed meeting, up from 88.5% the previous day.

Technical Analysis

* Technical Breakout: USDJPY was traded lower following prior breakout below the previous support level 153.450. MACD which illustrate diminishing bullish momentum signal suggest the pair likely to extend its losses.

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards 151.950. Conversely, a potential reversal is also to be expected and the price could head towards 155.250 after it breach back above the level 153.450.

Potential Risks

Moving forward, investors will focus on the upcoming U.S. GDP report for the second quarter as a key catalyst. Additionally, other data such as U.S. durable goods orders and initial jobless claims will also be closely monitored.

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Monitoring

Stay updated on US and Japan data, central bank updates and any shifts in the US Dollar’s strength by following PU Xtrader’s financial news page.

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