- USD/JPY surpasses 147.00 as market anticipates Flash US S&P Global PMI and Japan’s national CPI data.
- Investors are looking forward to Powell’s address at the Jackson Hole Symposium for insights into future monetary policy.
- The pair has closed close to the 20-day EMA in recent weeks.
The USD/JPY pair is trading within a narrow range, hovering around 147.40 during the late Asian trading hours on Thursday. As investors prepare for a speech from Chairman Jerome Powell on Friday, the pair is likely to remain steady.
Market participants are particularly focused on Powell’s remarks, which could hint at whether the Federal Reserve might lower interest rates in its upcoming September meeting.
On Thursday, the preliminary US S&P Global PMI report for August, scheduled for release at 13:45 GMT, is expected to influence the US dollar. At the moment, the US Dollar Index (DXY) is fluctuating around 98.30, which tracks the dollar’s performance against six major currencies.
In Japan, traders are keeping an eye on the July National Consumer Price Index (CPI) data set to be released in the Asian session on Friday, especially as economists look for the CPI excluding fresh food, which saw a moderate 3% increase.
The USD/JPY pair has been moving sideways for about three weeks, trading between 146.22 and 148.52. At this level, it hovers near a 20-day EMA of approximately 147.56, reflecting a horizontal movement.
The 14-day relative strength index (RSI) is fluctuating in the 40.00 to 60.00 range, indicating some indecision among traders.
The pair is approaching the psychological milestone of 150.00, as well as a peak of 151.20 noted on March 28.
On the flip side, a reversal below the July 24 low of 145.85 was marked at 144.22 on July 7, trailing back to a low of 143.45 from July 3.
USD/JPY Daily Chart
US Dollar FAQ
The US dollar (USD) serves as the official currency of the United States and is also in use in several other countries, often alongside local currencies. As of 2022, it’s the most widely traded currency globally, representing more than 88% of forex transactions, which average around $6.6 trillion daily. After World War II, the dollar replaced the British pound as the primary global reserve currency. Historically, it was backed by gold until the Bretton Woods Agreement in 1971, which eliminated the gold standard.
The key element impacting the USD’s value is the monetary policy established by the Federal Reserve. The Fed’s dual focus is on maintaining price stability (managing inflation) and supporting full employment. Adjusting interest rates is their primary tool for achieving these objectives. If prices rise sharply and inflation goes beyond the Fed’s target of 2%, they typically increase interest rates, which tends to bolster the dollar’s value. Conversely, if inflation dips below 2% or unemployment is high, they may lower rates, which can weigh on the greenback.
In severe scenarios, the Federal Reserve might resort to printing more money and implementing quantitative easing (QE). This approach increases liquidity within the financial system during times of uncertainty when banks are reluctant to lend to one another. If simply lowering interest rates doesn’t yield the desired results, QE becomes a last resort. The Fed employed this strategy effectively during the credit crunch of the 2008 financial crisis, buying US government bonds primarily from financial institutions. However, QE usually results in a weaker dollar.
On the other hand, quantitative tightening (QT) is when the Federal Reserve stops buying bonds and refrains from reinvesting principal payments from maturing bonds. Generally, this is seen as a positive development for the US dollar.
