- USD/JPY has started out the week in the consolidation of Friday’s pressure in the greenback.
- Eyes are on equities Nikkei strong start on Wall Street and Powell.
- USD/JPY made a low of 111.04 on Powell’s dovishness and the market falling somewhat out of the dollar.
- Technical indicators entered positive territory, although the RSI turned flat around 54.
USD/JPY has started out the week in the consolidation of Friday’s pressure in the greenback where the pair drifted south from the recovery highs up to 111.48. The balancing scales gave in to what was otherwise a relatively robust performance in the pair when comparing to other dollar crosses such as the Aussie that has been fraught with political unrest in Canberra – ( leaving the Aussie on tender-hooks despite resolution of the leadership battle).
USD/JPY made a low of 111.04 on Powell’s dovishness and the market falling somewhat out of the dollar. Powell’s speech explained that the US economy was not seen as overheating and the anchoring of long-term inflation expectations meant that “policy can be a bit more accommodative than if policymakers had to offset a rise in longer-term expectations” – analysts at Westpac explained that this was seen as guiding the interest rate path to be less steep than it might have been: “A September rate rise is still priced as a near-certainty, but there is more debate about the outlook in 2019.”
The tone from Powell appeals to the risk-on plays
Looking around, however, the tone from Powell appeals to the risk-on plays such as the high betas and that is going to keep a lid on the yen, as will the PBoC stepping up to support the Yuan which will pressure de-risking trades. US equities will be a big sign this week as to how the market is digesting the US yield curve warnings out there – potentially a troubling signal for the US economy ahead and yen supportive.
USD/JPY levels
Valeria Bednarik, chief analyst at FXStreet explained that the daily chart shows that the pair settled above its 100 DMA, which maintains a bullish slope above the 200 DMA.
“Technical indicators entered positive territory, although the RSI turned flat around 54. In the 4 hours chart, technical indicators retreated from overbought levels before turning flat well above their midlines, while the price hovers between its 100 and 200 SMA, unable to surpass the largest. A strong static resistance area comes between 111.40 and 111.50, with a break beyond this last required to confirm additional gains ahead.”
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