- For the second day in a row, the price of the USD/JPY currency pair is subject to selling from its highest levels in a year, stabilizing around 150.40 at the time of writing the analysis.
- Meanwhile, its highest levels this week were testing the 151.70 resistance.
- Obviously, the divergence between the policies of the US central bank and the Bank of Japan continues to support the bulls' dominance of the trend.
- Recently, The current sharp upward trend will not be reversed without a Japanese intervention in the markets to prevent further collapse of the currency's price.
Stocks Are Rising After FED Comments
Yesterday, the US Federal Reserve kept US interest rates at their highest level in 22 years, signalling concern about rising yields. However, the Federal Reserve has indicated that the rise in long-term Treasury yields is reducing the incentive to raise interest rates again, even as Fed Chair Jerome Powell left the door open for another hike to tame inflation. Also, Powell indicated that policymakers may raise interest rates when they meet next month, he also allowed officials to end the campaign to tighten monetary policy. Furthermore, he said he is not yet confident in judging whether monetary policy is tight enough to bring inflation back to the Fed's 2% target.
Powell said in response to a question of whether most policymakers still expect another interest rate hike to be necessary this year: "It is fair to say that the question we are asking is whether we should raise interest rates more.
The Federal Open Market Committee (FOMC), which sets U.S. monetary policy, kept interest rates at their highest level in 22 years for the second consecutive meeting on Wednesday. In a statement following the meeting, the committee said that "the tightening of financial and credit conditions for households and businesses is likely to affect economic activity, employment, and inflation," adding the word "financial" to language that previously referred only to credit conditions. Clearly, the Federal Reserve added that "the extent of these effects is still uncertain," repeating that it "remains highly attentive to inflation risks."
As a result, the S&P 500 stock index and Treasury yields continued to rise while the dollar fell after the announcement. Also, traders reduced the chances of another hike in the coming months.
At his press conference, Fed Chair Jerome Powell said that financial conditions "have tightened significantly in recent months, driven by higher and longer-term bond yields, among other factors." He also said that previous interest rate increases were putting downward pressure on economic activity and inflation, and that the full effects of the tightening have not yet been felt. Powell added that "in light of the uncertainties and risks, and how far we've come, the committee is acting cautiously." "We'll continue to make our decisions meeting by meeting."
Powell also said that the presence of additional evidence of continued above-trend growth, or that Labor market tightness is no longer abating, could jeopardize further progress on inflation. Therefore, this could call for more interest rate hikes, echoing remarks he made in New York last month.
USD/JPY Outlook & Predictions
Our technical view of the performance of the USD/JPY currency pair remains unchanged. The overall trend is still up, and the stability around the 150.00 resistance supports the bulls. At the same time, the technical indicators are moving towards strong overbought levels, as is the case now with the test of the 151.70 resistance. As, USD/JPY is close to this level in preparation for any Japanese intervention in the markets. If this happens, it will bring strong and sharp selling operations to the currency pair, changing the direction to a strong decline in a short time. According to the performance on the daily chart below, breaking the support level of 148.20 will support the breaking of the overall upward trend.
The USD/JPY currency pair will remain on its upward path until there is Japanese intervention in the markets. In addition to investors' anticipation of the announcement of US job figures at the end of the week.
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