The factors that could see USD/JPY collapse below 140
Sept 11 (Reuters) -USD/JPY looks set for a bigger drop due to various factors affecting the US, focus on interest rate differential convergence between the Federal Reserve and Bank of Japan, and the bearish medium-term chart.
Growing risks to the U.S. stock rally are spurring demand for portfolio hedging, options markets showed, as investors grapple with U.S. economic uncertainty, shifting Fed policy and a looming presidential election. In times of uncertainty, funds usually flow into the safe-haven yen.
There are expectations that the Fed and BOJ rates will partially converge through to the end of 2025, according to the LSEG Interest Rate Probability App. BOJ's Junko Nakagawa reiterated in a speech on Wednesday that the central bank would continue to raise interest rates if the economy and inflation move in line with its forecasts.
The medium-term USD/JPY chart is bearish, as spot is trading well below the 144.59 Fibo, a 50% retrace of the 127.22-161.96 (2023-2024) EBS rise. USD/JPY will likely collapse below the 140 psychological level.
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Rate Expectations Chart: https://tmsnrt.rs/4dWqYCh
Weekly Chart: https://tmsnrt.rs/3TkQMQv
(Martin Miller is a Reuters market analyst. The views expressed are his own)
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