USD/JPY pulled back on potential profit-taking as the pair approached the key 160.50 resistance zone, but the broader uptrend stays intact. A hawkish Jackson Hole speech from Fed Chair Warsh pushed September rate-hike odds to 67%, while the BoJ's Ueda offered no new signals on tightening.
The dollar strengthened across the board on Friday after Fed Chair Warsh delivered a hawkish speech at the Jackson Hole Symposium, reversing part of the pullback that had built up in USD/JPY.
Warsh's Jackson Hole remarks retighten conditions
The key line from the speech was Warsh saying, according to InvestingLive: "I would be hard pressed to describe broad financial conditions as restrictive." Markets read that as a pushback against the recent easing in financial conditions, and conditions retightened as a result.
That process extended the correction in so-called "debasement" trades, with the dollar returning to levels last seen before the US Treasury announcement. September rate hike probabilities have also risen, with markets now pricing a 67% chance of a hike. Warsh reiterated that the Fed is focused solely on inflation, adding that progress has been slow.
Yen strength looks more like profit-taking than policy shift
On the JPY side, the currency strengthened, reportedly on hawkish comments from BoJ's Takata. However, interest-rate expectations remained largely unchanged, so the move more likely reflects profit-taking ahead of the key resistance around the 160.50 level on USD/JPY.
BoJ Governor Ueda also commented on monetary policy but didn't offer anything new; his tone was a bit less hawkish than markets had expected. The September rate hike is already priced in, so traders will instead focus on forward guidance and signals of a faster tightening pace.
Technical picture stays skewed higher
On the daily chart, USD/JPY has reached the key resistance zone around 160.50, where sellers could step in with a defined risk above it, targeting a drop toward 155.00. Buyers, on the other hand, want a break higher to build bullish bets toward 164.00.
The trend is unlikely to reverse without a dovish repricing in Fed rate expectations or a faster pace of BoJ tightening. Traders now turn to the US ADP report today, followed by Fed's Waller, jobless claims and the ISM Services PMI tomorrow, before Friday's US NFP report.
Source: InvestingLive
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