Trade idea on USD/JPY on August 31, 2022
After yesterday's strengthening with the testing of the level 139.00, on Wednesday USD/JPY retreated from the maximum and is trading close to 138.50.
The pair is supported by strengthening of the dollar which got a new growth impulse after the speech of Jerome Powell at the symposium in Jackson Hole last Friday. The head of the Fed confirmed the regulator's intention to continue its active fight against high inflation, as "the responsibility of the Central Bank to ensure price stability is unconditional. The market assessed Powell's speech as "hawkish," missing the Fed governor's thesis that at some point it will become advisable to reduce the pace of rate hikes. which supported the strengthening of the dollar. Investors expect rates to rise at least through the end of this year.
Analysts believe the size of the monetary tightening will be 50 basis points in September, 50 in November and 25 in December. The total rate hike over the remaining three meetings would reach 125 basis points. This scenario makes the dollar index more attractive than other forex indices.
At the same time, the Bank of Japan does not retreat from its soft monetary policy and has no plans to curtail its economic stimulus program, reinforcing the contrast with the Fed's monetary policy.
The ADP report on the US labor market, due at 12:15 GMT, may provide additional support to USD/JPY today.
In this connection we propose to place a buy order for USD/JPY
Buy-stop 138.90 take-profit 140.50 stop-loss 138.40