USD/JPY Gains Positive Traction After Finding Support From 136.3 Level
- USD/JPY Pair attracts fresh bullish bets on Friday after oscillating in a narrow rangeĀ
- Series of mixed U.S. macro data drag ten-year treasury bond yields lower
- U.S. Dollar retreats after edging lower on Thursday on expectations of hawkish Feds chairman remarks today during economic symposium
- The lower-than-expected Japanese PMI data undermines the Japanese Yen
USD/JPY Pair has been oscillating in a narrow range of 136.339 - 136.837 since Thursday afternoon as market participants look forward to Powell's speech today during the Jackson Hole Symposium. That said, the cross met fresh demand on Friday during the early hours of the Asian session after attracting bullish bets to lift spot prices from the previous day's YTD low. At the time of speaking, the pair is up 11 pips for the day and looks set to maintain its bid tone heading into the European session.
The ten-year U.S. benchmark yields retreated on Friday and dropped nearly 8 basis points to 3.031% as traders sought clues out of the Federal Reserve's annual meet in Jackson Hole, Wyoming.
Additionally, a series of mixed U.S. macro data also turned out to be another factor that dragged the ten-year treasury bond yields lower on Friday. According to the Labour Department on Thursday, jobless claims drifted more down in the week ending Aug. 20, while a revision for second-quarter GDP showed a smaller decline according to the latest GDP report by the U.S. Bureau of Economic Analysis. The mixed macro data followed this week's disappointingĀ pending home sales data and the S&P PMIs dataĀ to further add fuel to concerns about global growth.
The U.S. Dollar index(DXY), which measures the value of the United States dollar relative to a basket of foreign currencies, retreated on Friday after slipping on Thursday from near a 20-year high of 109.29. The U.S. Dollar continues to draw support from the expectation that FED's Chairman will remain hawkish on his monetary stance against fighting inflation in his speech during the FED's annual economic symposium in Jackson Hole, Wyoming.Ā IF Powell comes off as hawkish as we expect on Friday, traders are likely to hop back on the bullish dollar bandwagon sooner rather than later," said Matt Weller, global head of research at forex.com and city index.
That said, Fed officials on Thursday were noncommittal about the size of the rate hike they will approve at their Sept. 20 - 21 meeting but continued hammering the point they will drive rates up and keep them there until inflation has been tamed. Traders are now pricing in a 47.5% chance the FED will raise interest rates by 50 basis points(bps) in September and a 52.5% chance it will raise them by 75bps.Ā
The Japanese docket's latest Japan PMIs data showed another month of expansion in the Japanese sector. However, the latest figure was the lowest in the sequence amid growing economic headwinds. The au Jibun Bank Japan Manufacturing PMI declined to 51 in August of 2022 from a final 52.1 in July; a preliminary reading showed on Tuesday. That said, the divergence in the monetary policy stance adopted by the Bank of Japan(Dovish Stance) and the FED(Hawkish) continues to play a crucial role in limiting any losses for the greenback.
As we advance, traders now look forward to Jerome Powell's speech today at 10 a.m E.T. during the economic symposium in which he is expected to indicate the U.S. central bank's position on the extent of further rate hikes needed to combat inflation. His speech would influence near-term USD price dynamics and help determine the next leg of a directional move for the USD/JPY pair.
Technical Outlook: Four-Hour USD/JPY Price Chart
From a technical perspective, using a four-hour price chart, the price has rebounded from the key demand zone ranging from 136.339-136.446 levels. The former coincidesĀ
With the lower horizontal trendline of the bullish pennant chart pattern, plotted as from Aug. 23 low. Some follow-through buying would lift spot prices towards testing the upper horizontal trendline of the bullish pennant chart pattern's resistance level. However, it will be met by stiff resistance from the 20 Exponential Moving Average(EMA) level at 136.683. Acceptance above the aforementioned EMA level and a convincing break above the upper horizontal trendline would pave the way for additional gains.
The moving average convergence divergence (MACD) crossover at 0.00214 paints a bearish scenario. The RSI(14) level oscillates in a narrow range of 47.8324 - 50.4019. All the technical indicators are pointing to a continuation of a bearish trajectory hence warranting caution to traders against submitting aggressive bullish bets ahead of the much-awaited U.K. Inflation report.
On the Flipside, a pullback toward testing the lower horizontal trendline of the bullish pennant chart pattern turned support level followed by a convincing break below the aforementioned trendline would negate any near-term bullish outlook and pave the way for aggressive technical selling.
