USD/JPY remains pressured around 100.00 on persistent Fed/BoJ uncertainty
James Chen, CMT August 18, 2016 12:45 PM
As the dollar has come under increasing pressure, the Japanese yen side of the currency pair has remained exceptionally strong, trading near long-term highs against its major currency rivals. Late last month, the yen strengthened further when the Bank of Japan (BoJ) disappointed investors and failed to cooperate with Japanese Prime Minister Shinzo Abe’s aggressive fiscal stimulus proposal by refraining from pushing further into negative interest rate territory or increasing its bond-purchase program. Additionally, the perception remains that the BoJ may be running out of monetary policy options in its hopes of propping up the Japanese economy and weakening its currency.
From a technical perspective, USD/JPY has continued to stagnate around the major 100.00 psychological support level, as mentioned, and has done so for the past two days in the absence of any clear catalyst for a significant move. The past four weeks have seen the currency pair drop precipitously from its July high just below 108.00 resistance down to this key 100.00 level, which sits just above the late-June post-Brexit low around 99.00.
A strong potential catalyst for a decisive USD/JPY breakdown below 100.00 should occur if the prospects of a near-term Fed rate hike and further BoJ easing actions BOTH continue to be increasingly doubted by the markets. In this event, any strong breakdown below 100.00 should subsequently begin to target key downside support objectives at 97.00 and 95.00.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.