USD/JPY Pulls Back to 146.33 Amid Rising Yen and Fed Rate Cut

20 Agu

The Japanese Yen is gaining ground against the US Dollar, with the USD/JPY pair pulling back to 146.33 as I write this. This upward movement is fueled by Japan's second-quarter Gross Domestic Product (GDP) growth, which exceeded expectations and bolstered the case for a potential near-term interest rate hike by the Bank of Japan (BoJ).

Despite this, the USD/JPY pair has found support from a stronger US Dollar, buoyed by rising Treasury yields.

From a technical standpoint, the price is currently retesting our identified Demand area, where we’ve already initiated a long position. Retail traders remain bearish, while commercial traders are starting to increase their positions.

The recent US Consumer Price Index (CPI) data has sparked discussions about the scale of the Federal Reserve’s potential rate cut in September. The market is leaning towards a modest 25 basis point reduction, with a 60% probability, although a larger 50 basis point cut remains a possibility, with a 36% chance according to CME FedWatch.

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