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USD/JPY faces choppy trading risk and possible retest of 160

ING expects a potential rebound to 160.0 even as dovish Fed expectations would normally favor the yen.

Reported · Written up by our desk · Major Pairs

ING’s Francesco Pesole said softer US data and a more dovish Federal Reserve outlook would, in theory, support the Japanese yen because of its sensitivity to interest rates, according to an analysis highlighted by FXStreet.

Pesole warned that after an intervention episode, traders may be biased toward rebuilding Japanese yen shorts, which could leave USD/JPY vulnerable to unsettled price action despite evolving expectations for the Bank of Japan.

FXStreet noted that neither intervention risk nor growing confidence in a September BoJ hike, including minutes described as modestly more hawkish, is expected to be enough to counter the short-covering impulse.

ING said USD/JPY has already returned to the pre-payroll 158.30 to 158.50 area, and it flagged a move back to 160.0 later in the month as a tangible risk, even if September delivers both a BoJ hike and a Fed hold.

Latest closeUSD/JPY 158.52 ▲0.6%

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