The US Federal Reserve raised interest by a lower percentage, as expected in light of the collapse of US banks, which contributed to investors abandoning the US dollar. Accordingly, the selling of the USD/JPY currency pair continued, with losses that affected the support level 134.83, and its gains before the decision reached 134.83. The resistance level 137.77 is the highest in nearly two months.
Yesterday the US Federal Reserve has strengthened its fight against high inflation by raising the key interest rate by a quarter point to the highest level in 16 years. But the Fed has also indicated that it may pause its streak of 10 rate hikes, which has made borrowing steadily more expensive for consumers and businesses. In a statement after its latest policy meeting, the Fed deleted a sentence from its earlier statement that said "some additional increases" in interest rates may be needed. He replaced it with formula that said it would consider a range of factors in "determining the extent" of which future hikes might be needed.
Speaking at a press conference, US Central Bank Chairman Jerome Powell said that the Fed has not yet decided whether or not to suspend interest rate hikes. However, he indicated that the change in the language of the statement at least confirms this possibility. Powell added that the Fed will continue to monitor recent economic data to determine whether to pause its increases.
However, the Fed's statement on Wednesday provided little indication that the series of rate hikes has made significant progress toward its goal of cooling the economy, labor market and inflation. US inflation has fallen from a peak of 9.1 percent in June to 5 percent in March but is still well above the Federal Reserve's target rate of 2 percent.
“Inflationary pressures continue to rise, and the process of returning inflation to 2 percent still has a long way to go,” Powell added.
High US interest rates contributed to the collapse of three large banks and turmoil in the banking industry. The three failed banks bought long-term bonds that paid lower rates and then quickly lost value as the Fed sent higher rates.
Forecasts of the US dollar against the yen:
- According to the performance on the daily chart below, the continuation of selling the US dollar against the Japanese yen, USD/JPY may push the currency pair towards the support levels 134.55 and 133.80.
- This is the most important for turning the currency pair's view into a bearish one.
- So far, approaching the resistance level of 136.00 will ensure that the bulls remain inside an ascending channel.
Today, the currency pair will be affected by investor sentiment after the US Federal Reserve announced yesterday, then prepare for the next important economic data, the US weekly jobless claims today, and then the announcement of the important US job numbers tomorrow.
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