Weakness in USD/JPY Sets 140.00 as the Next Lower Barrier

VOT Research Report

Market Analytics and Considerations

On the back of a weaker US currency, USD/JPY plunges.

Probably soon, the USD/JPY will hit 140 once more.

After the most recent inflation report exceeded market expectations and suggested that price pressures were easing, the US dollar dropped significantly on Thursday. Annual US inflation decreased from 8.2% in the previous month to 7.7%, fueling hopes that the Federal Reserve may scale back the pace and magnitude of future rate increases. Although he also indicated that rates might need to be at a restrictive level for some time, Fed chair Powell has already stated that the central bank would eventually slow rate increases. Inflation data from yesterday will offer Powell some leeway before the FOMC meeting in December.

The market was estimating a 50/50 possibility of either a 50bp or a 75bp rate increase going into Thursday’s statement. The market is currently pricing an 83% likelihood of a 50bp increase and a 17% likelihood of a 75bp increase.

From 8.2%, US inflation has decreased to 7.7%. What the Fed and the US Dollar Can Expect

A wide range of risk markets rose substantially yesterday as a result of the dollar’s abrupt flip, and the market saw a significant decline in the value of the dollar. The Nasdaq gained more than 7%, gold broke past resistance and reached more than $1,760/oz, and the EUR/USD appreciated significantly, rising from 0.9980 to almost 1.0230, making sub-parity pricing appear to be a thing of the past. With the rate-sensitive 2-year down more than 25 basis points on the session, US Treasury rates dropped dramatically.

The USD/JPY pair plunged on Thursday as a result of a shift in US rate expectations, coming within a few point of hitting a level last reached in late September at 140. From late September of the previous year, the pair has increased by a factor of 40 because of a strong dollar and a weak yen. With the exception of a few recent moves, the Bank of Japan has mostly been observing the movement from a distance and will be relieved to see USD/JPY decline. Any move higher is expected to struggle to make any headway, with the immediate target range being 139.40 to 140.00.

According to COT Latest figures-Retail traders reduce their net shorts.

According to statistics from retail traders, 1.29 traders for every one short trader shows a net long position of 43.57%. While the number of traders who are net-long has increased by 5.50% from yesterday and by 13.46% from the previous week, the number of traders who are net-short has decreased by 24.74% from previous and by 30.43% from the preceding week.

We frequently adopt a contrarian stance to the general consensus, and the fact that traders are net short the USD/JPY signals that pricing may climb further. However, traders are less net-short today than they were yesterday and last week. Regardless of the fact that traders are still net-short, recent shifts in mood indicate that the current USD/JPY market trend may shortly reverse lower.

Daily – Moving Averages

Technical Summary:  STRONG SELL

Moving Averages: Buy (2) Sell (10)

Technical Indicators :Buy (0 )Sell (7)

Pivot Points

Technical Indicators

Moving Averages