Technical analysis of the US dollar against the Japanese yen
The US dollar did recover somewhat during Monday’s early morning session, but it’s probably worth noting that the United States itself and Canada both celebrate Labor Day during the trading session, so this would have been more of a mid-day session. However, short-term declines should find support. And I think the pair is starting to form some sort of bottoming pattern.
Finally, the Bank of Japan cannot tighten monetary policy too much as that would completely ruin the Japanese economy. Moreover, traders on Wall Street had gone way too far in pricing in the possibility of rate cuts. So I think we are in a situation where we will probably need to consolidate or maybe even move significantly higher to get back down to earth. Remember, you are being paid to hold on to this pair and I think that is something that people will be paying close attention to again soon enough.
While the Federal Reserve is expected to cut rates in September, inflation in the US is more stubborn than previously thought, so I think they will have to tighten monetary policy for longer. I don’t think they will tighten monetary policy. I just think they will loosen it a little, and probably very slowly. In other words, the carry trade could well resurface as traders quickly forget the last “thing” and move on to the next one.
You can find an overview of all current economic events in our economic calendar.
This article was originally published on FX Empire.
