USD/JPY Forecast: Yen Rises Amid BoJ-Fed Divergence

• The likelihood of a 50 bps Fed rate cut in September fell amid better-than-expected data.

• This week traders will be watching the Jackson Hole Symposium.

• Bank of Japan Governor Kazuo Ueda will speak on Friday.

The USD/JPY forecast points to solid bearish momentum as the yen rises on diverging policy outlooks from the Bank of Japan and the Fed. Fed policymakers are likely to adopt a dovish tone and support expectations for a rate cut in September. On the other hand, BoJ policymakers adopted a dovish tone, which could indicate more rate hikes to come.

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The yen has rallied since Friday as expectations of a Fed rate cut rose. At the same time, investors took profits from the dollar’s recent rally, weakening the greenback. Last week, the likelihood of a 50 bps Fed rate cut in September fell amid better-than-expected data. However, that of a smaller cut has increased. Markets are currently fully pricing in a 25 bps rate cut in September. While the rate cut cycle could be gradual, it will likely start next month. As a result, the dollar could remain fragile.

This week, traders will be watching the Jackson Hole Symposium, during which Powell could offer clues about the Fed’s policy path. Experts believe the Fed chairman could signal the start of interest rate cuts in September. At the same time, the minutes of the FOMC policy meeting will show what went into the latest decision to hold interest rates.

Meanwhile, in Japan, the central bank has started raising interest rates and may do so again. Bank of Japan Governor Kazuo Ueda will speak on Friday. A jaded tone will further highlight the divergence in political outlook between Japan and the US.

Key USD/JPY Events Today

Traders are not expecting high-impact economic data from the US or Japan. As a result, the pair could extend last week’s move.

USD/JPY Technical Forecast: Bearish Turn Puts 142.56 in Bears’ Sights

From a technical point of view, the USD/JPY price has broken below the 30-SMA, indicating a change in bearish sentiment. At the same time, the price fell below the bullish trend line and below the 0.382 Fib level. In the previous move, the bulls set their sights on the 150.03 resistance level and the 0.618 Fib. However, before the price got there, there was a bullwhip movement that saw the bears take control.

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The RSI is now trading below 50, supporting bearish momentum. Therefore, the price could continue to decline to the 142.56 support level.

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