What's on the horizon for USD JPY?

FX:USDJPY   U.S. Dollar / Japanese Yen
USD JPY is an interesting pair to observe. The pair was quick to react as bears took control after President D. Trump announced additional tariffs on China.
The pair met support that’s been respected several times in history at 105.520 at the opening of August 6th . A bullish engulfing candle followed but resistance prevailed at the 38.2% Fibo level. The next big move came on the 13th of August. The bulls took charge and rallied all the way to resistance at 38.2% Fibo. Not sure whether the recovery was due to better than expected US CPI or the fact that on that same day President D. Trump decided to postpone the additional tariffs on China till December – on some goods.

The pair has since been travelling in a flat with great respect to the 38.2% Fibo level at 106.680. Even upbeat retail sales from the US didn’t have much of an effect on the pair. All eyes remain on Fed Chair Jerome Powell and his speech tomorrow at 14:00 GMT at the Jackson Hole Symposium.

At the last FOMC statement on the 31st of July the FED lowered the Central Bank interest rate by 25 basis points and his statement was hawkish but a lot has changed since then. The US-Sino Trade war shows no signs of either side giving in and additional tariffs are on the table. Turmoil in Hong Kong, Brexit and short lived but scary inverted yield curve are also contributing to Global market uncertainty.

In the most recent update President D. Trump first stated that the White House is considering tax cuts to boost the economy and then a day later said that he is not considering tax cuts as “we have a strong economy” stated President D. Trump on Wednesday the 21st.

Considering that the market and the global economy is in such a new and unusual state of affairs let’s examine both sides of the coin.

If the FEDs statement is more on the hawkish side, we may see the US Dollar grow with target areas at 107.184 (50% Fibo) followed by 107.687 (61.8% Fibo).

If on the other hand the FED gives clues for further easing we’ll see the pair fall below 106.057 (23.6% Fibo), next target will be a strong support level in the area of 105.520, followed by 105.050 which is the lowest low since January 3rd of this year when the price spiked to a low of 104.656.


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