© Dukascopy Bank SA
It seems that uplifted probability of a Chinese economic slowdown has set the majority of traders against the American Dollar in course of the previous working week ended Aug 28. Market participants weighed the degree of US exposure to weakness in the world's second-biggest economy, which is likely to call a Fed rate hike in September of this year into question. On Monday of the previous week only 28% of analysts surveyed by Bloomberg expected the Federal Reserve to tighten the monetary policy stance this month, while earlier hawkish estimates were reaching 50%. However, the Jackson Hole Symposium showed the FOMC members are not excluding the possibility of acting on Sep 17.
Despite all, market volatility dropped rapidly after a "Black Monday" on Aug 24, and the US Dollar decided to regain bullish momentum versus the majority of other currencies on the foreign exchange. Therefore, USD/JPY erased all losses that occurred on Monday and Tuesday to trade above 121 by the end of the reported time period. Moreover, additional Yen-bearish signals were provided by low inflation projections and speculations the Japan's economic recovery is unsustainable. Meanwhile, only 27% of participants in the weekly quiz suggested the pair would develop to the north last week. This week's forecasts, however, are favouring the Greenback's bullish tendency, but an advantage of long votes is insignificant, namely 53% vs 47% for bears. Moreover, according to the majority of traders, we are unlikely to see a strong recovery, as the mean forecast for Friday of this week is located at 120.5. On the bearish side, massimoscala estimates that the safe-haven Yen will be predominantly driven by Chinese events. He pointed out that "If the problems with China continue, the Yen is likely to be bought. So, I think that after an initial attempt to break 122, if it fails to return to descend."
© Dukascopy Bank SA