US Dollar Outlook: USD/JPY
USD/JPY clears the December low (140.25) as it extends the series of lower highs and lows from last week, with the recent selloff in the exchange rate pushing the Relative Strength Index (RSI) towards oversold territory.
US Dollar Forecast: USD/JPY Clears December Low with Fed on Tap
USD/JPY slips to a fresh yearly low (139.58) as there appears to be a further deterioration in carry trade interest, and the Federal Reserve interest rate decision on September 18 may keep the exchange rate under pressure as the central bank is expected to implement at least a 25bp rate cut.
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With that said, USD/JPY may face a further decline over the coming days as the Federal Open Market Committee (FOMC) starts to unwind its restrictive policy, but fresh forecasts from Chairman Jerome Powell and Co. may curb the recent selloff in the exchange rate should the update to the Summary of Economic Projections (SEP) show little indications of a rate-cutting cycle.
USD/JPY Price Chart – Daily
Chart Prepared by David Song, Strategist; USD/JPY on TradingView
- The recent weakness in USD/JPY may persist as it carves a series of lower highs and lows, and a move below 30 in the Relative Strength Index (RSI) is likely to be accompanied by a further decline in the exchange rate like the price action from last month.
- Need a close below the 140.50 (61.8% Fibonacci retracement) to 141.50 (38.2% Fibonacci extension) region to bring the July 2023 low (137.24) on the radar, with the next area of interest coming in around 134.70 (78.6% Fibonacci retracement) to 136.00 (23.6% Fibonacci extension).
- At the same time, lack of momentum to close below the 140.50 (61.8% Fibonacci retracement) to 141.50 (38.2% Fibonacci extension) region may push USD/JPY back towards the 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension) area, with a breach above the monthly high (147.21) raising the scope for a move towards 148.70 (38.2% Fibonacci extension).
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--- Written by David Song, Strategist
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