Does the USD/JPY Bounce Have More to Give?

Does the USD/JPY Bounce Have More to Give?

Credit Agricole anticipates a potential rally in USD/JPY this week, hinging on market reactions to Federal Reserve Chair Jerome Powell’s upcoming address at Jackson Hole. The bank suggests that traders might need to recalibrate their expectations for Fed rate cuts.

Current market sentiment, as reflected in the CME Group’s FedWatch Tool, shows a 77.5% probability of a 25 basis-point rate cut and a 22.5% chance of a 50 basis-point cut. Goldman Sachs’ chief economist, David Mericle, also aligns with the 25 basis-point outlook for September, downplaying the likelihood of a more aggressive move.

The focus will be on Powell’s speech, scheduled for Friday at 10 a.m. ET. Should Powell strike a less dovish tone than expected, key resistance levels at 150.00 and 152.00 could be tested, with the potential for USD/JPY to surge even higher.