The USD/JPY: technically, with a bearish touch below 109.00

By Admiral Markets

Source: Economic Events July 24, 2019 – Admiral Markets’ Forex Calendar

At a glance, the economic calendar looks quite packed on Wednesday and there looks to be some potential market movers for US yields which could result in some price action fireworks in the USD/JPY.

However, we are a little sceptical if chances are really so high to see big moves in the currency pair, as we find ourselves currently in the FOMC blackout period which started last Saturday and where we should expect volatility to stay subdued.

After the comments from NY Fed president Williams last Thursday, “to take swift action when faced with adverse economic conditions” and “keep interest rates lower for longer,” which was interpreted as exceedingly dovish. It resulted in a short-term push in expectations of a 50 basis point rate cut from the Fed on July 31, to nearly 70%, and we are now back at an approximately 75% likelihood of a 25 basis point rate cut which isn’t likely to significantly change even if we get to see some data surprises today.

Technically, the picture stays neutral on a daily time-frame between 106.80 and 109.00, even though with a bearish touch below 109.00. Mid-term, we see the clear advantage in the USD/JPY on the short-side, especially if the Fed delivers a dovish stance on July 31 with a target around 105.00 and lower:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between July 19, 2018, to July 23, 2019). Accessed: July 23, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the USD/JPY increased by 13.7%, in 2015, it increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, meaning that after five years, it was up by 4.1%.

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