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Investors Reducing Long Positions Ahead of Powell

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  • There is uncertainty in the markets ahead of Powell’s speech at Jackson Hole.
  • Japan’s monthly economic report said the economy was moderately picking momentum.
  • In the charts, the price has broken below the 30-SMA.

Today’s USD/JPY outlook is bearish. Ahead of Federal Reserve Chairman Jerome Powell’s highly anticipated address at the Jackson Hole central bankers’ conference on Friday, investors continue to reduce long positions for a second session, causing the Dollar/Yen to move lower.

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Although investors anticipate Powell to give a hawkish speech in Jackson Hole, some are hedging their bets that the speech won’t be sufficiently hawkish.

Although the US dollar may weaken early on Thursday, Treasury yields are rising. The price movement indicates ambiguity on whether Powell endorses the aggressive stance of the US central bank to contain inflation or indicates a “pivot” to gradual interest rate increases.

The greatest thing Powell can do is adopt a clear and convincing position on rate hikes and the likelihood of a US recession. Investors will likely seize on a lack of confidence in his speech and cause increased volatility until the Fed decides on its interest rate on September 21.

Japan’s monthly economic report, published on Thursday, stated that the country’s economy was “moderately picking momentum.” Although the survey recognized an increase in factory output, the overall evaluation remained the same as the previous one.

USD/JPY key events today

Some investors will trade the weekly unemployment statistics and the US preliminary GDP report later today. Because it is used to predict recessions, today’s US GDP report is significant. It will spark a discussion about whether the US economy is genuinely in a recession, which may affect whether the Fed keeps up its aggressive plans to lower inflation. Investors will also be keen on the initial jobless claims report from the US.

USD/JPY technical outlook: The next bearish leg aiming at 135.42

USD/JPY outlook

The 4-hour chart shows the price trading slightly below the 30-SMA showing bears taking over. The RSI, which trades below 50, favors bearish momentum. The price could not break above the 137.519 resistance level, at which point there was a strong bearish candle. This candle was the first sign that bulls were getting weak.

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Now that the price is trading below the 30-SMA, it will likely fall to the next support level at 135.426.

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