USD/JPY PRICES, CHARTS AND ANALYSIS:

• USD/JPY Looks to Advance Beyond Last Weeks High Following Temporary Pause.
• USD/JPY Bulls Remain Cautious Ahead of a Busy Data Week and the Continuous Cloud of FX Intervention.
• IG Client Sentiment Has the Majority of Traders Holding Short Positions on USDJPY.

The Yen looked to pare back some losses this morning following the release of the updated Economic outlook by the Japanese Government. This was followed by further attempts from Chinese authorities to bolster the economy which led to a slight risk-on mood in the Asian session and weighing on the US Dollar. However, as the day has progressed and with low liquidity thanks to the UK banking holiday, we have seen USDJPY continue its advance, eyeing a break of last week’s high.

JAPAN MONTHLY ECONOMIC OUTLOOK REPORT

The Japanese Government released its monthly economic outlook report for August overnight with no changes of any significance. The Government sees private consumption picking up with business investment also showing positive signs. The government also expressed satisfaction with the industrial production numbers and corporate profits which are improving moderately as a whole. Consumer prices are rising but remains below the Central Banks target with ultra easing monetary policy needed as a result.

The recent tentative moves we have witnessed in JPY pairs could be down to the ongoing fears of FX intervention by Japanese authorities. Historically these have come without warning and has the potential to stoke volatility. Last year's FX intervention saw whipsaw price action follow with USDJPY enjoying a wild day of swings with a 600-odd pip move from the low to high of the day. With this in mind we could be in for some form of hesitancy as USDJPY continues to trickle higher with bulls cautious about overcommitting in case FX intervention becomes a reality.

DATA PACKED WEEK AHEAD

A lot on the calendar this week in the form of risk events particularly from the US. As Central Banks globally are expected to see monetary policy divergence moving forward this is even more pronounced between the BoJ and the US Fed. At the Jackson Hole Symposium we heard Fed Chair Jerome Powell keep the door open for further hikes while stressing the need for data dependency.

This makes the week ahead even more intriguing given some key data releases expected out of the US. GDP 2nd estimates, Core PCE and of course the NFP jobs report all lie ahead this week and could give market participants a clearer indication of what to expect from the FED. Positive data prints here could further aid the US Dollar rally as market participants are likely to hawkishly reprice a potential Fed peak rate.

FINAL THOUGHTS AND TECHNICAL OUTLOOK

USD/JPY looked on course for a deeper retracement last week following positive technical signs. A double top on the Daily timeframe was followed by a daily candle break and close below the 145.00 handle.

The break of the 145.00 handle looked significant at the time but was followed up by a bullish engulfing candle illustrating the weakness and lack of conviction by JPY bulls at the moment. As things stand, we are trading at a resistance area around the 146.50 mark. A convincing break above here and we do have a lot in terms of resistance all the way up to the 150.00 psychological level. Given the constant fear around FX intervention, I do not expect a move higher to be swift and without some short-term pullbacks.

Key Intraday Levels to Keep an Eye On:

Support levels:

• 145.90
• 145.00 (Psychological Level)
• 144.50

Resistance levels:

• 146.50
• 147.50
• 150.00 (psychological level)

USD/JPY Daily Chart – August 28, 2023

Source: TradingView, Chart Created by Zain Vawda

IGCS shows retail traders are currently Net-Short on USDJPY, with 78% of traders currently holding SHORT positions.

https://www.dailyfx.com/news/forex-japan-maintain-economic-outlook-usd-jpy-catches-its-breath-at-weekly-high-20230828.html