ARK Invest Founder, CEO, and CIO Cathie Wood recently commented on Treasury yields and the Fed Funds Rate, stating,
“The metal-to-gold ratio suggests that the 10-year Treasury bond yield should be around 2% today, not where it is at 3.8% or last October’s 5%. If the 10-year Treasury should yield ~2% today, should the Fed funds rate be closer to 1%?”
The Bank of Japan’s Summary of Opinions revealed the intention to return the policy interest rate to the neutral rate over time, projected at 1%. If interest rate differentials do matter, the outlook is particularly bearish for the USD/JPY.
US Economic Calendar
On Friday, August 9, investors should track FOMC Member speakers. Insights on the US labor market, the economic outlook, and the interest rate trajectory may influence USD/JPY demand. Concerns about the US labor market and the economy, and calls for multiple rate cuts could push the USD/JPY below 145.
US initial jobless claims data from Thursday, August 8, eased immediate concerns about the US labor market. However, US continuing jobless claims continued to trend higher, affirming a softer labor market.
The unexpected rise in the US unemployment rate and continuing jobless claims trends supported multiple 2024 Fed rate cuts.
Rising expectations of a more dovish Fed rate path could signal a USD/JPY drop toward 140.
Arch Capital Global Chief Economist Parker Ross commented on the jobless claims report, stating,
“Recall that initial claims are flows into unemployment, while continuing claims are a reflection of how many people are unemployed. Flows (i.e. layoffs) have been relatively normal for most of 2024, but unemployed workers are taking longer to find a new job, which is reflected in the much higher level of continuing claims vs initial claims relative to recent non-COVID norms.”
Parker’s observations align with FOMC Member Thomas Barkin’s views on the US Labor Market. On Thursday, Barkin noted that firms were neither hiring nor firing, which could shift in either direction.
Short-term Forecast: Bearish
USD/JPY trends will hinge on central bank commentary. Support for multiple Fed rate cuts and pressure on the Bank of Japan to prepare for another rate hike could trigger another Yen carry trade unwind and a USD/JPY drop below 140.
Investors should remain alert. Monitor real-time data, central bank insights, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.
USD/JPY Price Action
Daily Chart
The USD/JPY remained below the 50-day and 200-day EMAs, affirming the bearish price signals.
A USD/JPY break above the 148.529 resistance level and the trend line would support a return to 150. Furthermore, a breakout from 150 could signal a move toward the 151.685 resistance level.
Central bank commentary needs consideration on Friday.
Conversely, a break below 147.500 could signal a fall toward the 145.891 support level. If the USD/JPY drops below the 145.891 support level, the bears could target the 143.495 support level.
The 14-day RSI at 32.39 suggests a USD/JPY drop below 147.500 before entering oversold territory.