Skip to content

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Market alert: Japanese yen holds ground against US dollar as Fed forum nears

USD/JPY is exhibiting a relationship with Treasury yields; overall US dollar moves are also beholden to US interest rates and all eyes are on Jackson Hole this week. Will the Fed summit move USD/JPY?

Source: Bloomberg

USD/JPY is exhibiting a relationship with Treasury yields; overall US dollar moves are also beholden to US interest rates and all eyes are on Jackson Hole this week. Will the Fed summit move USD/JPY?

The Japanese yen remains vulnerable to external factors as it resumed weakening against the US Dollar last week. The broader strengthening of the ‘big dollar’ can be seen through the DXY index.

The DXY index is a US dollar index that is weighted against EUR (57.6%), JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%) and CHF (3.6%). If we look at USD/JPY against the DXY index and the ten-year Treasury note yield, the correlation becomes fairly apparent.

Source: TradingView

Understanding where the ten-year Treasury yield is headed may provide an edge for trading USD/JPY.

The upcoming annual Jackson Hole symposium could set the stage for an opportunity with a keynote address from Federal Reserve Chair Jerome Powell on Friday.

Previous gatherings of central bankers in the ski resort have occasionally revealed significant policy shifts. This time last year the Fed labelled accelerating inflation as transitory. This year, the alarms bells are ringing on eye wateringly high inflation becoming entrenched.

The language will be closely watched for clues on how determined the central bank is to get inflation back toward their goal of around 2%.

Overnight Federal Reserve Bank of Minneapolis President Neel Kashkari renewed his hawkish credentials referring to his concern of the ‘unanchoring of inflation expectations’.

This led to some speculation of a 100 basis-point (bp) hike at their September Federal Open Market Committee (FOMC) meeting. Market pricing is swaying between a 50- or 75-bp rise in the target rate.

The consensus appears to be that Fed Chair Powell will be more moderate in his language. A deviation from this rhetoric could see Treasury yields move significantly, leading to potentially outsized USD/JPY moves.

USD/JPY technical analysis

As identified on Monday in USD/JPY price action, 137.46 is the 78.6% Fibonacci Retracement of the move from 139.39 to 130.39. The price has failed to hold above that level and it may continue to offer resistance.

Nearby support could be at the break point of 135.57. The 34- and 55-day Simple Moving Averages (SMA) are also near that level and might support it.

Source: TradingView

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Find out more

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.