Currency Analyst since 2010

USD/JPY: forecast for August 3-9

By Elizaveta Belugina

USD/JPY dipped to the 123.00 area, but then recovered to 124.50. Is the pair capable of a strong break to the upside?

Bank of Japan's Governor Kuroda

The expectations of the Federal Reserve’s rate hike drove the greenback up. However, traders are cautious on the approach to 125.00 remembering that the Bank of Japan Governor Haruhiko Kuroda has recently rejected the necessity for further monetary stimulus in Japan. Japanese inflation data came out mixed: nationwide core CPI rose by 0.1% in June exceeding forecasts, but Tokyo core CPI fell by the same amount in July. Traders are sure that the Bank of Japan will at least keep its current very loose monetary policy firm in place. However, this may not be enough for the pair’s decisive break to the upside.  

The bulls will be less active above 124.50. There is a risk of verbal interventions from Japanese authorities at these levels.

Next week pay attention to the Bank of Japan’s meeting on Friday and to plenty of important US economic releases. The market’s risk sentiment will be another thing to watch. Chinese stock market once again crashed on Monday and will show the biggest monthly decline in 6 years. Further concerns about China will strengthen the yen as a safe haven.

Overall, we do not think that it is a good idea to buy USD/JPY close to 125.00. Support is at 123.35/00 – in this area the pair looks better prices for longs.  

USD/JPY, Daily

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