Japanese Yen: Faces risk of return to 160 against US Dollar – ING

ING analyst Francesco Pesole notes that softer U.S. economic data and expectations of a more cautious Federal Reserve could boost the Japanese Yen (JPY). However, he warns that post-intervention rebuilding of JPY short positions and limited effects from Bank of Japan (BoJ) outlooks leave the USD/JPY pair susceptible to erratic trading and a potential return to 160.0 this month.

Pesole explains that the yen should typically benefit from dovish U.S. surprises due to its high sensitivity to rates. Yet, the likelihood of rebuilding JPY shorts post-intervention and growing confidence in a BoJ hike in September does not seem enough to counteract this trend. Currently, USD/JPY has rebounded to the pre-payroll 158.30-158.50 range.

The coming months may be unpredictable, with a move back to 160.0 at some point this month considered a real risk, even if the BoJ hikes and the Fed holds in September. While the dovish Fed outlook strengthens, so does the bearish stance on the dollar. Despite Friday's price adjustment, 11 basis points are still expected for September, 28 for December, and 40 for April.

There remains significant room for further dollar depreciation if the Fed's stance remains unfavorable. The U.S. calendar remains clear, but Fed Chair Harker is expected to speak. Meanwhile, GBP/USD continues its weekly decline, nearing the 1.3530 level as the British Pound faces increased selling pressure due to stronger Dollar gains, particularly from Chair Warsh's speech at the Jackson Hole Symposium and the revised U.S. Non-Farm Payrolls data (-79K).

EUR/USD also accelerates its downward trend, hitting seven-day lows in the sub-1.1600 range toward the week's end, following a robust Dollar rebound after Chair Warsh's hawkish remarks during the Jackson Hole event and the U.S. NFP Annual Revision falling to -79K. Gold's decline intensifies, breaking below its 200-day Simple Moving Average near $4,530 per troy ounce, as a general sense of optimism about the Dollar and rising U.S. Treasury yields drive investors to reprice a possible September rate hike.

Bitcoin slides below $80,000 after failing to break through the $81,000-$82,000 resistance zone, with Ethereum and Ripple following a similar downward trend, with ETH testing $2,500 and XRP nearing the $1.40 support level. The Dollar strengthens ahead of ISM PMI and NFP data releases, while New Zealand's Reserve Bank is expected to raise interest rates, with attention focusing on forward guidance.

The Bank of Canada is set to hold, but the possibility of a rate hike in 2027 remains open. Oil market dynamics show a mixed picture, with diesel facing a significant challenge as the US diesel crack spread, the premium of ultra-low sulfur diesel futures over West Texas Intermediate (WTI), pushes above $100 per barrel for the first time, reaching an intraday record of just over $102.00.