Dollar-yen might find a range rather than bounce
The yen’s strengthening accelerated at the very end of last month as the Bank of Japan (BoJ) surprised markets with another hike to 0.25%. However, it’s unclear whether the BoJ will hike again within the next few months since various senior members of its board have ruled this out when markets have been so unstable. Based on current expectations, the difference in rates between the USA and Japan will remain around 3.75-4.25% until the end of the year, so carry trades would remain viable in that situation.
Given the momentum of the downtrend in its latest phase to 4 August, it’s difficult to point to a specific area as support. ¥145, June 2023’s high, is possible, but ‘buying the dip’ here would probably need to leave more room than usual for the price to move with a more distant stop, probably somewhere in the tail from 5 August. Although there was an upward crossover of the slow stochastic in oversold and neither that nor Bollinger Bands now signal selling saturation, the relatively low momentum of the bounce so far makes an ongoing recovery questionable.
That’s not necessarily a problem for carry traders, though, since dollar-yen still provides quite a good yield by recent historical standards. However, as for other pairs with the dollar, American inflation on Wednesday 14 August is a critical release. If the annual headline figure is lower than the 2.9% expected, there could be a strong short-term downward reaction.
This is my personal opinion which does not represent the opinion of Exness. This is not a recommendation to trade.
Given the momentum of the downtrend in its latest phase to 4 August, it’s difficult to point to a specific area as support. ¥145, June 2023’s high, is possible, but ‘buying the dip’ here would probably need to leave more room than usual for the price to move with a more distant stop, probably somewhere in the tail from 5 August. Although there was an upward crossover of the slow stochastic in oversold and neither that nor Bollinger Bands now signal selling saturation, the relatively low momentum of the bounce so far makes an ongoing recovery questionable.
That’s not necessarily a problem for carry traders, though, since dollar-yen still provides quite a good yield by recent historical standards. However, as for other pairs with the dollar, American inflation on Wednesday 14 August is a critical release. If the annual headline figure is lower than the 2.9% expected, there could be a strong short-term downward reaction.
This is my personal opinion which does not represent the opinion of Exness. This is not a recommendation to trade.
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