Japanese Yen, USD/JPY, Fed, Jackson Hole, Nikkei 225 – Asia-Pacific Market Open

  • Japanese yen tumbles as US dollar appreciates in past 24 hours
  • Dovish Bank of Japan an obstacle to the JPY after Jackson Hole
  • Nikkei 225 pulls back ahead of this week’s US jobs report

Monday’s Market Recap – Japanese Yen Slumps as US Dollar Appreciates

The Japanese yen was the worst performing G10 currency against the US dollar on Monday, mostly driven by fundamental themes that have weakened it over the past week. It was a calm 24-hour period given the lack of risk of a major economic event. This allowed traders to digest and continue to reposition following the annual Jackson Hole Economic Symposium.

On Friday, Federal Reserve Chairman Jerome Powell continued to double down on his highest inflation-fighting message in 40 years. He also told the world that there might be economic difficulties in doing so. As a result, markets boosted hawkish political expectationscontinuing to eat away at the pivotal forecast for 2023.

This brings us back to the Japanese yen. At this point, the Bank of Japan is the only one to stand out among its G10 counterparts as a dove. Given that markets focused last week on a more hawkish Fed, this left the JPY vulnerable. Additionally, Asia-Pacific markets were offline during Jackson Hole. Most of USD/JPY’s rise on Monday occurred in the APAC trading session as regional investors likely caught up to the news.

USD/JPY Technical Analysis – Daily Chart

USD/JPY closed Monday at its highest since mid-July, clearing the resistance point of 137.65. That brought it within inches of the current 2022 high of 139.391. This point presents itself as a key resistance. Removing it would open the door for a resumption of the dominant uptrend towards the 78.6% Fibonacci extension at 140.63. Otherwise, key support appears to be at the 38.2% level at 135.37.

Chart created in TradingView

Tuesday Asia-Pacific Trading Session

Much like Monday, Tuesday, there is little risk of key economic events ahead for the Asia Pacific trading session. This would likely lead traders to focus on overall risk appetite and perhaps position ahead of Friday’s US jobs report. More signs of a tight labor market could support hawkish bets on Fed policy, putting the US dollar in a favorable position. This may also bode well for sentiment, leaving the Nikkei 224 in jeopardy.

Nikkei 225 Technical Analysis – Daily Chart

On the daily chart, Nikkei 225 futures are down about 4.1% from August 17e high (29230). Prices have confirmed a break below the 20-day simple moving average (SMA). But, a long-legged Doji candlestick pattern was left behind. This is a sign of indecision as prices retest the former downtrend line from September 2021. As such, key support appears to be immediately below. This can provide an opportunity to rebound. Otherwise, further losses could open the door for an extension of the decline. Such a result emphasizes the 61.8% Fibonacci retracement level at 26940.

Japanese Yen Under Pressure As USD/JPY Climbs After Jackson Hole, Will Nikkei 225 Crash?

Chart created in TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

element inside the

element. That’s probably not what you wanted to do! Upload your application’s JavaScript bundle to the item instead.

About The Author

Related Posts