Wednesday, September 4, 2019

USD/JPY

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Fundamental Highlights


The Dollar fell during yesterday’s session after the US ISM manufacturing index printed at 49.1 for August versus 51.2 in July which was the first sub-50 reading since August 2016. This clear disappointment will provide further fuel to the market and President Trump’s desire for further Federal Reserve interest rate cuts. Subsequently, in fears of a looming recession, markets are pricing 29bp of easing at the 19 September Fed meeting. Meanwhile there was some Fed commentary which was mixed. Boston’s Rosengren said the economy is doing fine and downplayed concerns over yield curve inversion, but left the door open to a rate cut given global weakness and tariffs. St. Louis’s Bullard however argued for a 50bp cut this month to get ahead of market expectations. Both are voters at this year’s FOMC. The pressure remains on the US Dollar as market participants are rushing towards the anti-risk Yen in this recessionary environment.

Technical Analysis

The pair fell below 106 but recovered before the end of the day as traders are still waiting for a further clarity in bias, even after the recent recessionary fears. The sellers will be attempting to push price back towards the bottom of the channel, 105, and the bulls will try to retest the overhead resistance area, 106.70. Price will remain with no apparent bias as long as the pair is trading between 106.70 and 105. A breakout from these levels will likely establish a new trend in the market.

Support: 105.70 / 105
Resistance: 106.25 / 106.70

Chart (H4)
USDJPY