The JPY tends to strengthen around the summer and you can see that bias play out in the USDJPY pair. Over the last 22 years, the USDJPY has fallen 14 times between July 27 and August 27. The average fall has been 1.06%.

The USD will be in key focus as the Fed meets tonight. The US July PMI Global Services print came in at 47 below minimum expectations last Friday and that puts growth very much in focus. Yes, the Fed is expected to hike by 75 bps – it could even be 100bps, but much of that is already priced into the USD. Will the Fed start to hint at concerns over slowing growth? Will the Fed hint at a coming pause in its rate hiking cycle? If it does that could be the catalyst that sinks the USDJPY in line with its seasonal weakness trend.

Major Trade Risks: If the Fed continues to stress tackling inflation, even at the risk of stifling growth, then the USD could still strengthen and that could change this outlook.

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