USDJPY daily
Credit Agricole sees potential for a rally in USD/JPY this week, driven by market reactions to Fed Chair Jerome Powell's upcoming speech at Jackson Hole, as investors position around US-Japan rate differentials.
Key Points:
Current Market Positioning:
- Investors are currently betting on a further narrowing of the US-Japan rates differential, anticipating a dovish message from Powell and a hawkish stance from BoJ Governor Kazuo Ueda.
Key Driver:
- The main driver of USD/JPY is expected to remain the UST yield side of the US-Japan rates spread, with Credit Agricole suggesting that the market may be overly aggressive in pricing in Fed rate cuts.
Potential Rally:
- Powell’s speech at Jackson Hole could prompt a correction in this aggressive pricing, potentially leading to a USD/JPY rally. The 150 level remains a significant hurdle for the exchange rate.
Conclusion:
Credit Agricole expects that the USD/JPY could rally following Powell’s speech at Jackson Hole, as the market may reassess its aggressive pricing of Fed rate cuts, with 150 being a critical resistance level.
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