Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

FX Watch: USD/JPY, AUD/JPY attempt to stabilise but trendline breakdown remains on watch

A busy week of US big tech earnings and a slew of key central bank decisions ahead have kept risk sentiments in a cautious state.

USD/JPY Source: Getty

Round-up

A busy week of US big tech earnings and a slew of key central bank decisions ahead have kept risk sentiments in a cautious state, as major US indices failed to retain their initial gains overnight and ended the session with a flat close. The VIX was just slightly higher by 1.3%, after easing from a key downward trendline around the highly-watched level of 20, which reflects some market indecision kicking in.

We may expect risk-taking to be more subdued in today’s session as well without much of a concrete catalyst to drive market direction, before volatility picks up in reaction to big tech earnings after-market and as the Federal Open Market Committee (FOMC) meeting gets underway. With a Federal Reserve (Fed) rate cut in September fully priced by markets, much around the upcoming meeting will hinge around policymakers’ guidance on what comes after that. Any call for back-to-back cuts could potentially be met with a mixed market reaction, given that it may be perceived as a higher degree of economic risks in the US economy to call for more urgency in easing.

USD/JPY attempting to stabilise after recent plunge

The Bank of Japan (BoJ) will kick off its meeting today, with market participants having their eyes around the central bank’s interest rate decision and clearer steps towards tapering its government bond purchases over the coming years. Above-target inflation and stronger wage growth may offer some confidence for the central bank’s hopes of a wage-price virtuous cycle, but weak consumption remains a source of reservation in tightening.

With market participants leaning towards a 10 basis point (bp) rate hike in the upcoming meeting (57% probability), any inaction on interest rate from the central bank will come as a dovish surprise and could see the Japanese yen unwind its recent strength. For now, the USD/JPY is attempting to stabilise around the 154.00 level, following near-term oversold technical conditions.

A breakdown of a key upward trendline this month, along with a move below its daily Ichimoku Cloud support for the first time since April 2023, may still point to a broader trend reversal in place to the downside. Near-term resistance may be found at the 154.60 level, most recently met with a slight rejection last week where a 23.6% Fibonacci retracement level resides. On the downside, the horizontal support at the 151.95 level will call for some defending, with any failure to hold the level potentially leaving the 147.27 level on watch next.

USD/JPY Mini Source: IG charts

Upward trendline breakdown for AUD/JPY in focus as well

Similarly, the AUD/JPY has broken below a key upward trendline support as well, which has previously supported higher lows for the pair on at least three occasions. The formation of a daily bullish hammer reflects some near-term dip-buying, following a more than 9% retracement since 11 July this year as technical conditions attempt to moderate from extreme oversold levels.

That said, buyers will have to reclaim the upward trendline to reflect greater control, with near-term resistance to be found at the 101.60 level. Failure to head back above the trendline could still leave a broader downward bias in place, which could see sellers challenge the dip-buying level at 99.20 ahead.

AUD/JPY Mini Source: IG charts

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.