Fundamental Forecast for Yen:Neutral
- Japanese Yen Unmoved by Better-Than-Expected 2Q GDP Figures
- USD/JPY Struggling at 102.55/80 Resistance Zone
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The USD/JPY pared the decline from earlier this month, with the pair trading back above the 102.00 handle ahead of the Fed’s Economic Symposium in Jackson Hole, Wyoming, but the dollar-yen may continue to carve a string of lower-highs in August as it preserves the opening monthly range.
Despite the 1.7% contraction in Japan’s 2Q growth rate, the better-than-expected GDP report may keep the Bank of Japan (BoJ) on the sidelines at the September 3 meeting, and it seems as though the central bank will retain its current approach for monetary policy throughout 2014 as Governor Haruhiko Kuroda remains confident in achieving the 2% target for inflation.
With that said, the Federal Open Market Committee (FOMC) Minutes and the Economic Symposium highlights the biggest event risks for the week ahead, and the fresh batch of central bank rhetoric are likely to spark increased volatility in the USD/JPY as market participants weigh the outlook for monetary policy. With Fed Chair Janet Yellen scheduled to speak on August 22 at 14:00 GMT, we would need to see a greater willingness to normalize monetary sooner rather than later to favor another run into the 103.00 handle, but the Fed conference may do little to boost the appeal of the greenback should we get more of the same from the central bank head.
In light of the recent commentary from Fed Vice-Chair Stanley Fischer, it seems as though the majority of the FOMC remains in no rush to move away from the zero-interest rate policy (ZIRP), and a new wave of dovish commentary may generate a near-term decline in the U.S. dollar as market participants push back bets for a rate hike. As a result, we would need to see the Fed boost interest rate expectations to see a further advance in the USD/JPY, but the pair may ultimately target fresh monthly lows in the week ahead should the central bank sounds more dovish this time around.