USD/JPY trims gains as Hamada wants Fed to do the heavy lifting

USD/JPY trimmed gains to trade around its 5-DMA level of 103.47 as Yen recovered ground following Abe advisor Hamada’s comments which suggested Japanese officials want the Fed to do the heavy lifting.

BOJ exhaustion is crystal clear

Hamada said today the BOJ should wait and see what the Fed does. This also means reduced prospects of a BOJ stimulus this month, thus Yen recovered losses.

Both central banks announce their respective rate decision on September 21. However, BOJ is scheduled to come out a few hours ahead of Fed; hence the call from Hamada to wait and watch.

Moreover, the interdependence among the central banks is a well known fact, however, Hamada’s comments simply underscore the fact that BOJ stands exhausted with regards to its efforts to weaken Yen and hence now wants Fed to “do the heavy lifting” (rate hike).

As of now the odds of a September Fed rate hike as per CME data stand at 21%. September was never on the table, while December rate hike bets dropped to coin toss levels following .

USD/JPY Technical Levels

A break below Asian session low of 103.36 would open doors for a sell-off to 102.70 (50-DMA). The level almost coincides with 102.65 (Aug 8 high) which is a major support. A violation there could force bulls to abandon their position, thus leading to a quick fire drop to 102.00 levels.

On the higher side, a break above 103.81 (Asian session high) could open up upside towards 104.32 (Sep 2 high) and 105.25 (100-DMA) levels.