Dollar pushes yen close to 110

The Japanese yen is in negative territory on Wednesday. Currently, USD/JPY is trading at 109.99, up 0.28% on the day.

It has been a relatively quiet week for the yen, which is hovering around the 110 line, which has psychological significance. With the markets in wait-and-see mode ahead of the Jackson Hole Symposium, the lack of substantial movement from the yen is likely to continue. This could change dramatically on Friday, when the star performer of the show, Fed Chair Jerome Powell, gives a speech that will be analysed with a microscope.

Will Powell announce a taper timeline?

Just a few weeks ago, the markets were confident that Powell would use the get-together to announce a timeline for Fed tapering, or at least provide some strong hints in that regard. However, the severe outbreak of the Covid-19 Delta variant may cause Powell to apply the brakes to any taper announcement, which would allow the Fed to digest further economic data as we move into September.

The recent FOMC minutes were viewed by the markets as hawkish, and the US dollar responded with broad gains. However, that rally has fizzled as the markets are no longer taking for granted that a taper is imminent. If the cautious Fed chair does not provide a timeline for a taper, the markets could react with disappointment and send the US dollar lower.

On the economic calendar, the only events out of Japan this week are all inflation releases. BoJ Core CPI for June, the Bank of Japan’s preferred inflation gauge, came in at 0.2%, up from 0.1% beforehand. Still, this gain wasn’t enough to give the Japanese yen a lift. Japan will release the Services Producer Price Index later today, followed by Tokyo Core CPI on Thursday. With the Covid Delta variant running rampant and the government extending the state of emergency, inflation, which is at low levels, could fall even further.

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USD/JPY Technical

• USD/JPY faces resistance at 110.30. Next, there is resistance at 110.82
•  On the downside, there is support at 109.19. Below, we find support at 108.60

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