- USD / JPY loses ground as US dollar breaks highs, testing 93 figure.
- All eyes are on the Fed and the Jackson Hole this week.
USD / JPY is currently trading at 106.34 between a range of 105.87 and 106.57, rising slightly on this day as risk sentiment remains robust, supporting US equity markets to new all-time highs .
Despite the terrible state of the Japanese economy, yields on US Treasuries have been trapped in relatively tight ranges, which is keeping the USD / JPY subdued, therefore, we do not see an aggressive selloff in the yen.
Likewise, the greenback is under scrutiny as we move towards the key event of the week, the Jackson Hole. More information below.
Meanwhile, the biggest short-term JPY trigger would likely be a correction in global asset markets. However, there have been many fundamentals that have yet to manifest in the markets.
The broader view in the market, despite the risks of coronavirus and the economic downturn, is that either Congress, the Fed, or a combination of the two would come to the rescue at the first sign of trouble.
Banking on a stock market correction remains like standing in the way of a steam train and the yen cannot catch a sustainable supply, despite deteriorating US data.
All eyes on the Fed
However, data is likely to play the supporting role of Federal Reserve sentiment and there is still some way to go until the next meeting.
Therefore, unless the rhetoric from Fed officials suddenly turns belligerent, the greenback is unlikely to rise before the FOMC which meets on September 15-16.
Jackson Hole will, of course, be important for the stock markets, the greenback and ultimately the USD / JPY.
In view of persistent inflation, the Federal Reserve is expected to indicate that rates could be lower for longer at a symposium on the theme and titled “Navigating the Decade to Come: Implications for Monetary Policy”.
The opening speech by Fed Chairman Jerome Powell will provide the market with information on the Fed’s review of monetary policy and the expected average inflation targeting.
USD / JPY levels
Major support for the pair is near 105.00, where Japanese fund managers should be hiding. On the upside, 107.80 is a target.