USD/JPY Analysis: Eyes on Fed Minutes – 21 August 2024

-- The Japanese yen stabilized around 145.00 yen per dollar at the start of trading on Wednesday after hitting a two-week high in the previous session, supported by strong expectations that the Federal Reserve will soon begin cutting US interest rates.
-- Several Federal Reserve officials have warned of growing risks to the US labor market and broader economy, indicating a readiness to cut borrowing costs next month.

In Japan, data earlier this week showed that machinery orders, an indicator of capital spending, rose 2.1% month-on-month in June, exceeding expectations of a 1.1% increase. Data released last week also showed that the country's economy expanded 0.8% on a quarterly basis in the second quarter, reversing a contraction of 0.6% in the first quarter and exceeding expectations of 0.5%.

On an annual basis, Japan’s economy grew 3.1% in the second quarter, reversing from a 2.3% decline in the first quarter and beating expectations of 2.1%. Now, markets are looking ahead to domestic inflation figures later this week for clarity on the Bank of Japan’s monetary policy path.

On the stock trading front, U.S. stocks ended a choppy session lower on Tuesday as investors awaited signals from the Federal Reserve on future U.S. interest rate cuts. The S&P 500 and Nasdaq 100 ended an eight-day rally, closing down 0.2% each, while the Dow Jones Industrial Average lost 61 points.

Meanwhile, the volatility has been on the rise ahead of the upcoming Jackson Hole symposium and the release of the Fed’s latest policy meeting minutes, which could provide clues on the potential size of the U.S. interest rate cut expected in September. Overall, energy and materials stocks were among the worst performers, while health and consumer staples posted the biggest gains. In corporate news, Lowe’s shares fell 1.2% after it missed revenue expectations and cut earnings forecasts, despite beating second-quarter earnings estimates. Also, Boeing shares fell 4.2% after grounding its 777X test fleet due to structural cracks. Meanwhile, Palo Alto Networks rose 7.1% on strong Q4 results and upbeat guidance, while Eli Lilly gained 3% after positive results for its weight-loss drug tripeptide.

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USD/JPY Technical Analysis and Expectations Today

Based on the daily chart attached, the bearish trend in USD/JPY is strengthening and the next strong targets for the JPY are 143.50 and 142.00 respectively. From the latter level, it is best to think about buying the currency pair as moving towards it will move technical indicators towards strong oversold levels. On the other hand, the psychological resistance of 150.00 will remain the most important for the bulls to regain initial control over the trend. The currency pair will remain on its current path until the markets and investors react to the announcement of the minutes of the last meeting of the US Federal Reserve today, and then the statements of the bank’s governor, Jerome Powell, at the end of the week.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.