Usdjpy Reclaims Resistance

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Usdjpy Reclaims Resistance

Usd/Jpy Reclaims 147.00 As Us Dollar Ticks Higher

USD/JPY has managed to buy some buyers near the lows and has once again reclaimed the 147.00 handle. However, the pair has given up some of its gains on the safe haven demand and the light trading volume.

The broader market mood shows an uptick in the demand for the US Dollar, which keeps the USD/JPY positive for now. On the US Federal Reserve front, it is now almost a certainty that rates will start to go down from September 2024.

0.50% Rate Cut Forecast From Us Federal Reserve

Now, the question is what will be the size of the rate cut from the US Federal Reserve. Some analysts believe that it will be a quarter, while others believe it will be as high as a half per cent (0.5%).

CME FedWatch tool shows a 56.5% chance of a September rate cut of around 50 bps. Just a week ago, the odds of a rate cut were near 74%, which shows a downgrade.

The reason for this decline in the chances of a rate cut is that the fear of a global slowdown has now eased slightly. This was achieved after the release of the US's initial jobless claims which shows that labor market is not as weak as the NFP report showed.

On the Japan front, the Bank of Japan is expected to raise the rates again in 2024. Just a few days ago, the SoP from BoJ showed that there is a need for additional rate hikes in the country. The reason cited for this is to time the inflation rate which remains high.

For now, the USD/JPY is up by 1.50% and has gained around 240 pips on the news that BoJ will not hike the policy rate in an unstable environment.

The fundamental developments show that the upside in the USD/JPY will be short-lived as we are only a few weeks away from the Fed's first rate cut of 2024.

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