USD weakens as Powell signals September rate cut, USD/JPY volatile

The US dollar retreated broadly after Fed Chair Powell's Jackson Hole speech maintained a dovish stance, acknowledging risks to the labor market and economy that may warrant policy adjustment. Powell highlighted a "curious kind of balance" in employment conditions, prompting markets to price in 84% probability of a 25 basis point rate cut in September. This dovish tilt has pressured the dollar across major pairs, with particular focus on USD/JPY dynamics. The pair initially sold off on Powell's comments but has since recovered to approach 147.50, demonstrating significant volatility. Nomura has increased conviction in their USD/JPY short position, targeting 142.00 by October, citing both Fed dovishness and potential Bank of Japan rate hike risks supporting yen strength. Technical levels show immediate resistance at 147.50, while support remains at Friday's lows. Traders should monitor upcoming US employment data for confirmation of labor market weakness that could solidify September rate cut expectations.