Forex Analysis & Reviews: 20.08.2024 - Will the yen return to the...

20.08.2024 03:18 PM

Will the yen return to the game?

In July, the yen became the most effective currency on Forex, strengthening by 7% against the U.S. dollar, and at the peak of Black Monday, its growth hit 12.5%. However, since then, concerns about a U.S. recession and the overnight rate hike by the Bank of Japan have subsided. USD/JPY has entered a consolidation phase, and now, investors are wondering where the pair will head next. Both the bulls and the bears have their own arguments.

For the past three years, the yen has been a clear underperformer on Forex. Just seven weeks ago, hedge funds held short positions in the currency of Japan at their highest levels since 2007. However, by the week ending August 13, they became net buyers of the yen for the first time since March 2021. On paper, this suggests that the unwinding of carry trades might have concluded. The fate of the yen will depend on whether carry traders are willing to return.

Speculative Position Dynamics on the Yen

The improvement in global risk appetite, evidenced by the ongoing rally in U.S. stock indices, the wide yield differentials between U.S. and Japanese bonds, and the slow pace of monetary policy normalization by the BoJ, suggests a gradual return to carry trades and supports the case for buying USD/JPY.

On the other hand, the persistence of high volatility on Forex, partly due to the upcoming September election of Japan's new prime minister and the November U.S. presidential election, creates significant obstacles for carry traders. Adding to this is the narrowing divergence in monetary policy between the Fed and the Bank of Japan, leading Europe's largest asset manager, Amundi, to predict a decline in USD/JPY to the 140 level, the lowest since July 2023.

In reality, the fate of the pair will depend on how quickly the central banks move. If the futures market is correct about a 100 bps cut in the federal funds rate in 2024, the U.S. dollar may be in trouble. If not, the American currency may still perform well. The Bank of Japan's actions are anticipated to be supportive. In the best-case scenario for the yen, it might raise the overnight rate from the current 0.25% one more time this year. In the worst case, it may not raise the rate at all.

Investors may soon receive some clues. Jerome Powell is scheduled to speak at Jackson Hole at the end of the week on August 23, while Kazuo Ueda will speak before the Japanese parliament on the same day. Markets are also awaiting the release of inflation data in Japan for July. If consumer prices, as Bloomberg experts predict, continue to accelerate, the BoJ will have no choice but to further tighten monetary policy.

Technically, on the daily chart, USD/JPY is forming an inside bar. In such conditions, it makes sense to set pending orders to buy the U.S. dollar against the Japanese yen from the 147.3 level and to sell from the support level at the pivot point of 145.7.

You have already liked this post today

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

Para cualquier consulta sobre contenidos, póngase en contacto con editorial-board@instaforex.com

Fundamental analysis

Marek Petkovich,
Experto analítico de InstaForex
© 2007-2025

Más artículos por este autor

Suscripción por correo electrónico

EURUSD

Euro vs US Dollar

Seleccione el marco de tiempo

min

hora

horas

día

Iniciar comercio

Gana con los cambios en el valor de las criptomonedas con InstaForex.

Descarga MetaTrader 4 y abre tu primera operación.

Recommended Stories

El caos en los mercados continuará (hay probabilidad de una continuación de la caída local del #USDX y del precio del oro)

Análisis del par GBP/USD. El 22 de mayo. El mercado vuelve a responder sin ambigüedades a Trump.

Análisis del par EUR/USD. El 22 de mayo. Un nuevo golpe al dólar: «One big beautiful bill act».

El Bitcoin se convierte en víctima de estafadores

Análisis del par GBP/USD. El 19 de mayo. ¿Qué esperar de la inflación en EE. UU.?

Análisis del par EUR/USD. El 19 de mayo. La guerra comercial frena al dólar.

EUR/USD. En la trampa del rango lateral

Análisis del par GBP/USD. El 15 de mayo. El calvario del dólar continúa.

Análisis del par EUR/USD. 15 de mayo. La fe del mercado en el dólar está por el suelo.

Análisis del par GBP/USD. El 14 de mayo. Solo importa el tratado comercial.

Principales Análisis