Should investors be wary of currency strength and weakness in cross-yen pairs, given the shift from yen weakness to a trend of yen buying?

Should investors be wary of shifts in currency strength in cross-yen pairs, given the recent shift from yen weakness to a trend of yen buying?

31.08.2023

In yesterday’s U.S. currency trading, the U.S. dollar fell against the yen despite the fact that the U.S. existing home sales figure for July, released yesterday, improved to 0.9% month-over-month from 0.3% the previous month. The USD/JPY pair fell from 146.525 to 146.534, breaking below the 200-period simple moving average (SMA) on the hourly chart.With prices continuing to test lower levels during today’s Asian session, we will be watching carefully to see if the dollar weakens against the yen ahead of tomorrow’s U.S. employment report.

Among European currencies, the pound emerged as the strongest currency during U.S. trading hours and rose against the yen. GBP/JPY climbed from 184.319 to 186.050, coming within striking distance of this month’s high in the mid-186 yen range. However, during today’s Asian trading session, the pair has pulled back and has already fallen to around 185.400.On the 4-hour chart, the price has risen to the +3σ level of the Bollinger Bands, so we will be closely monitoring for a pullback in the near term.

Today, Swiss retail sales are scheduled for 3:30 PM, followed by the French Consumer Price Index and Producer Price Index at 3:45 PM, German employment statistics at 4:55 PM, and at 6:00 PM, Eurozone employment statistics and the Eurozone Harmonized Index of Consumer Prices (HICP),at 8:30 PM: U.S. Challenger Layoffs; at 9:30 PM: U.S. Initial Jobless Claims, Canada’s Current Account, U.S. Personal Income, and U.S. PCE Deflator; at 10:00 PM: Remarks by Collins, President of the Boston Fed; and at 10:45 PM: U.S. Chicago PMI.We should be cautious regarding currency strength in cross-yen pairs, as the trend has shifted from yen weakness to yen buying.