A July Fed rate cut would significantly impact buyer demand for the USD/JPY. Narrowing interest rate differentials on diverging monetary policies may signal a USD/JPY drop below 150.
Could the Fed Cut Interest Rates in July?
On Monday, Wall Street Journal Chief Economics Correspondent Nick Timiraos reacted to Powell’s speech:
“Fed Chair Jay Powell passed on an opportunity to change expectations that the central bank will hold rates steady at its next meeting. The Q2 inflation data “do add somewhat to confidence” that inflation is returning to 2%.”
Timiraos also reported that Goldman Sachs’s Jan Hatzius considered the chances of a July Fed rate cut, stating,
“While September remains our baseline, we see a solid rationale for already cutting in July. If the case for a cut is clear, why wait another seven weeks before delivering it?”
Short-term Forecast: Bearish
USD/JPY trends depend on the US labor market data and inflation numbers from Japan (Fri). Higher US continuous jobless claims could raise bets on multiple 2024 Fed rate cuts. Conversely, inflation figures from Japan could signal a July BoJ rate hike. The BoJ may also cut JGB purchases more than expected.
Narrower interest rate differentials could signal a USD/JPY break below 150.
Investors should remain alert. Monitor real-time data, central bank commentary, 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 sat below the 50-day EMA while holding above the 200-day EMA. The EMAs sent bearish near-term but bullish longer-term price signals.
A USD/JPY break above the 50-day EMA could support a return to 160. A return to 160 could give the bulls a run at the July 3 high of 161.951.
Trade data from Japan, the continuous jobless claims, and central bank commentary require monitoring.
Conversely, a break below the 155 handle could bring the 200-day EMA and the 151.685 support level into play.
The 14-day RSI at 33.44 indicates a USD/JPY decline to 155 before entering oversold territory.
