- The dollar is rallying on global growth concerns.
- Markets expect Fed Chair Powell to deliver a hawkish address at the Jackson Hole.
- In the charts, the pair has found resistance at 137.431.
Today’s USD/JPY outlook is bullish as the dollar rallies on global recession fears. The dollar continued to rise amid worries about global growth as most central banks kept rising interest rates, while China’s slight rate cut helped to underline issues with its real estate market.
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There is also the risk that U.S. Federal Reserve Chair Jerome Powell won’t live up to investor expectations for a dovish policy tilt when he addresses a large gathering of policymakers in Jackson Hole later in the week.
“We expect a reminder that more tightening is needed, and there is still a lot of progress to be done on inflation, but no explicit commitment to a specific rate hike action for September,” said Jan Nevruzi, an analyst at NatWest Markets.
“For markets, a bland delivery like that could be underwhelming.”
The U.S. dollar has strengthened as the most liquid of safe havens, rising to 108.44 on a basket of currencies due to the prevailing atmosphere of global concern. Last week, it experienced its most excellent performance since April 2020, rising 2.3%.
“The USD can track above 110.00 this week if the August flash PMIs for the major economies show a further slowing in economic growth or contraction in activity,” said Joseph Capurso, head of international economics at CBA, referring to surveys of manufacturing due on Tuesday.
“We also expect Powell to deliver a hawkish message about inflation, in line with recent comments from other Fed officials supporting the USD.”
If the dollar rally continues, USD/JPY might head for 138.00.
USD/JPY key events today
There are no significant news releases from the United States or Japan so the pair will react to macroeconomic events.
USD/JPY technical outlook: Strong resistance at 137.43
Looking at the 4-hour chart, we see that bulls are in control since the price is trading above the 30-SMA. The RSI also favors bullish momentum as it trades above 50. Bears have returned to the overbought region, lowering the price from the resistance level at 137.431.
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The price will likely retest support at 135.426 with the 30-SMA as confluence before going higher.
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