Dollar mixed, yen under pressure ahead of Jackson Hole

USD

The US dollar has traded mixed over the past couple of sessions, with traders likely taking profits and hedging ahead of today's speech by Fed Chair Warsh at Jackson Hole. The annual symposium, hosted by the Federal Reserve Bank of Kansas City in Wyoming, has long served as a venue where Fed chairs frame the policy debate, and remarks from the podium have historically moved rate expectations. Warsh is not expected to give forward guidance, but what traders will be more focused on is whether he leans against the easing in financial conditions that followed the Treasury buyback announcement and Bessent's "verbal" intervention to suppress long-term yields.

If he does not, the US dollar will likely come under renewed pressure from further easing in financial conditions and the dovish repricing of near-term interest rate expectations. On the other hand, if he pushes back with language such as "recent easing in financial conditions, if sustained, could complicate the process of returning inflation to our target" or "if recent easing threatens progress toward price stability, we will not hesitate to respond appropriately," the market may retighten financial conditions and give the greenback a boost.

JPY

The Japanese yen, meanwhile, continues to trade under pressure due to a lack of changes on the fundamental side. A Bank of Japan rate hike in September is largely priced in, so that alone is not expected to change anything. The trend is unlikely to change without a dovish repricing of Fed interest rate expectations or a faster BoJ tightening pace — a dynamic that underscores how USD/JPY trades on the expected interest-rate gap between the Federal Reserve and the Bank of Japan, a core fundamental driver for the pair.

Technical analysis - daily timeframe

On the daily chart, USD/JPY has been slowly recovering ground after the intervention — Japanese authorities have repeatedly stepped into the currency market in recent years when yen depreciation turned rapid — with the first major target being the resistance zone around the 160.50 level. If the price gets there, sellers can be expected to step in with a defined risk above the resistance to position for a drop back into the 155.00 handle. Buyers, on the other hand, will look for a break to increase bullish bets into new cycle highs.

Technical analysis - 4-hour timeframe

On the 4-hour chart, a minor support zone sits around the 158.50 level. If the price pulls back into this support again, buyers can be expected to step in with a defined risk below it to keep pushing into new highs. Sellers, on the other hand, will look for a break to pile in for a drop into the 155.00 handle next.

Technical analysis - 1-hour timeframe

On the 1-hour chart, an upward trendline defines the bullish momentum. Buyers will likely continue to lean on the trendline with a defined risk below it to keep pushing into new highs. Sellers, on the other hand, will look for a break to target a pullback into the 158.50 support. The red lines define the average daily range for today.

Upcoming catalysts

Today, all eyes will be on Fed Chair Warsh's speech at the Jackson Hole Symposium. The prepared remarks are typically released either moments before or simultaneously as the Fed Chair delivers his speech. Further out, the Bank of Japan's September policy decision is the next scheduled checkpoint for the rate-differential story that dominates this pair.

Source: ForexLive