The Fed has decided to pause at its latest policy meeting keeping rates at 5.00-5.25% range. They explained that in doing so they can see more economic data and make better decisions on how much to raise interest rates to bring inflation down to their target without causing too much damage to the economy. They have also raised their terminal rate projection although the market doesn’t see it happening as recent economic data started to disappoint, especially the labour market data. The on JPY side, the BoJ maintains its easy monetary policy and no change is expected in the near future.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY has reached a key resistance level at 142.17 where we can also find the 61.8% Fibonacci retracement level of the entire fall from the October 2022 high. The price is a bit overstretched from the blue 8 moving average so we may expect a bit of a pullback before the next move. There’s also a divergence with the MACD right at this resistance which makes a pullback into the 138 support more likely.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see the price is now finding some support at the red 21 moving average and a previous swing high level. The sellers should pile in here with a stop above the 61.8% Fibonacci level and the trendline as first target. In fact, we can see that at the 138 support we can also find the 50% Fibonacci retracement level for confluence. From a risk management perspective, that will be a good level for the buyers to enter at with a defined risk below the trendline.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see the support level where the price is reacting from. We can also notice a divergence with the MACD, therefore if the price breaks below this support level, we can expect a bigger selloff into the 138 level. For the price to break above the 142.17 resistance sustainably, we should get some very hawkish comments from Fed speakers or the economic data have to surprise upwards.
This week we will hear from many Fed members including Fed Chair Powell who’s going to testify to Congress on the state of monetary policy on Wednesday and Thursday. We conclude the week with the US Jobless Claims on Thursday and US PMIs on Friday.
