Fundamental Analysis

• Focus on Powell’s Speech at the Jackson Hole Meeting
• While supporting rate cuts, Powell may remain cautious about significant cuts.
• The Dollar Index rebounds with adjustments, and USDJPY rises to the lower 146JPY range.

USDJPY technical analysis

Analyzing the daily chart of USDJPY, the pair has bounced twice at 144.60JPY, which corresponds to the 50% retracement level of the weekly Fibonacci. The chart pattern resembles a double bottom. The neckline is likely to be around 148.70JPY, which corresponds to the 38.2% retracement level. The central line of the Bollinger Bands is also moving around this area, suggesting that the market is waiting for Powell’s speech.

It is expected that Powell will support rate cuts but will not suggest a significant 0.50% rate cut. Some stakeholders are already pricing in a significant rate cut, and stocks are continuously rallying. If a cautious stance is implied, USDJPY is likely to rise temporarily. However, in this scenario, stocks may drop sharply, causing USDJPY to fall again. It’s a somewhat difficult market, so cautious trading is essential.

Day trading strategy (1 hour)

USDJPY has risen above the 90MA, reaching the 146JPY range. The 90MA had previously acted as resistance three times, so the breakout could lead to further gains towards the upper 146JPY range. A key level to watch is 146.46JPY.

Powell’s speech is scheduled for today, and the market seems to be in a wait-and-see mode. Should there be a rate cut by the Fed, it could mark a turning point for the market. Even though it’s largely priced in, the impact would be significant. The size of the rate cut is the main focus.

Given the overall direction towards a rate cut by the Fed, the basic strategy is to sell on rallies. Enter a sell trade at 147.80JPY and take profit at 146.45JPY, with a stop at 148.25JPY. No trades should be made around 23:00, and entry should be considered after Powell’s speech has settled.

Support/Resistance lines

The following support and resistance lines should be considered moving forward:

• 144.60JPY – Weekly Fibonacci 50% Retracement

Market Sentiment

USDJPY: Sell 48%, Buy 52%

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*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.