USD/JPY Poised for Rally Amid Potential Fed Policy Shift at Jackson Hole

Credit Agricole is forecasting a potential rally in USD/JPY, driven by shifts in market expectations following Federal Reserve Chair Jerome Powell’s upcoming speech at the Jackson Hole Economic Symposium. The bank suggests that traders may need to adjust their outlook on the Fed’s rate-cut trajectory, depending on Powell’s tone.

Current market data, as indicated by the CME Group’s FedWatch Tool, shows a 77.5% probability of a 25 basis-point rate cut and a 22.5% chance of a 50 basis-point cut. Goldman Sachs also aligns with the expectation of a 25 basis-point cut in September, downplaying the likelihood of a more aggressive move.

All eyes will be on Powell’s address, scheduled for Friday at 10 a.m. ET. If Powell adopts a less dovish stance than anticipated, USD/JPY could break through key resistance levels at 150.00 and 152.00, potentially driving the pair even higher.