Japanese Yen Forecast: USD/JPY Biased Lower as Rallies are Capped

JAPANESE YEN PRICE ANALYSIS AND NEWS

• FOMC Focus on Future Policy Signals
• Japanese Yen Anchored at 105.00, USD/JPY Bounce to be Capped

FOMC FOCUS ON FUTURE POLICY SIGNALS

As to be expected before an FOMC meeting, markets are relatively calm. For the meeting itself, the consensus is for Chair Powell and Co. to maintain current monetary policy. While little is expected in the way of new policy announcements, particularly after yesterday’s extension of lending programs until the end of the year. That said, the focus will be on the accompanying comments and the hints of future policy plans, whether that be yield curve control, or altering rates guidance to hitting or exceeding its 2% inflation target.

However, with little less than a month until the Jackson Hole Symposium (Aug 27-28), which may instead be a more opportune time to provide signals over future policy changes. As such, markets hoping for further easing signals in today’s meeting may be left disappointed. (Jackson Hole Topic: “Navigating the Decade Ahead: Implications for Monetary Policy”)

JAPANESE YEN ANCHORED AT 105.00, USD/JPY BOUNCE TO BE CAPPED

The Japanese Yen has been on an impressive run over the past week as USD/JPY gave in to the gravitational pulls of a weaker US Dollar, resulting in a 2% drop in the pair. To my surprise, the return of Japanese market participants from the market holiday failed to see local sellers in JPY, suggesting that risks remain biased lower for the pair. While pre-FOMC could see USDJPY anchored around 105.00, which coincides with a sizeable $1bln option expiry and post-FOMC disappointment could see a bounce in USD/JPY, 105.50 looks to be the short-term cap for bounces, while greater resistance resides at 106.00. On the downside, eyes will be on for a move towards 104.30-45.

JAPANESE YEN PRICE CHART: DAILY TIME FRAME