Technical Analysis and Market Trends

The USDJPY pair is on a downward trend as Federal Reserve officials hint at a possible interest rate cut in September. Recent comments from Federal Reserve member Kashkari have added to the USD’s losses, especially following weaker-than-expected Non-Farm Payroll data. The market has adjusted its predictions to include a 60 basis-point reduction by the end of the year, up from 35 basis points before the NFP release. This week, the ISM Services PMI showed an increase in the prices index. Upcoming US jobless claims might change how people view the labor market. If the claims are weak, it could strengthen expectations for more Fed easing, putting further pressure on the USD. The Japanese yen gained strength after the weak NFP data, adding to anticipations of dovish moves from the Fed. In our technical analysis of the daily chart, USDJPY keeps declining, with sellers eyeing the 144.50 trendline. Buyers may wait for a chance to rally above this trendline. On the 4-hour chart, the price has pulled back to a broken trendline, attracting sellers with defined risks above. Buyers might look for a rally towards the 151.00 level if the price reaches 146.00. The 1-hour chart shows a downward movement, suggesting that sellers may look to act below 146.00 for further declines. Currently, the US Dollar is under pressure as Federal Reserve officials point to a rate cut in September. Data from the CME FedWatch Tool this morning, August 7th, 2025, indicates an 85% chance of a 25-basis-point cut next month. This aligns with the market’s expectations following last week’s employment data. This shift toward dovish sentiment comes after the Soft Non-Farm Payrolls report last Friday, August 1st, which recorded a gain of only 155,000 jobs, below the anticipated 200,000. The report also revealed a slight dip in annual wage growth to 3.8%, which supports the case for the Fed to ease its policy. We anticipate that Fed Chair Powell may reaffirm this position at the Jackson Hole Symposium later this month.

The Japanese Yen and Derivative Trading Strategies

On the Japanese yen front, there are subtle signs of strength that could amplify the USDJPY downtrend. The latest Tokyo Core CPI data for July showed a slight increase at 2.7%, sparking speculation that the Bank of Japan may act sooner than expected. Continued signs of inflation in Japan may increase expectations for future rate hikes from the BoJ. For derivative traders, this scenario presents an opportunity to position for further downside in USDJPY. Strategies might include buying JPY call options or USD put options to target the 144.50 level. Implied volatility has gone up, reflecting the market’s anticipation of significant movements around upcoming data releases. The key trendline around 144.50 is now a crucial target and a potential strike price for put options that expire in late September. If today’s jobless claims figures are weak, this could push the price lower. Conversely, a strong figure might cause a temporary bounce, offering a better entry for new short positions. We can recall market activity in late 2023 and early 2024, when similar expectations for a Fed policy shift caused a substantial unwind of long USDJPY positions, resulting in over a 10-figure drop within a few months. This historical trend could guide us if US inflation data continues to weaken through autumn. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now