USD/JPY Analysis: All Eyes on the Fed

• Finally, Fed policymakers may be on the verge of cutting interest rates.
• Ahead of that move, the USD/JPY pair is stabilizing higher around the 148.33 resistance level at the time of writing.
• With the US monetary policy meeting, which runs for two days this week, concluding on Wednesday afternoon in Washington.
• Furthermore, investors are assigning roughly equal odds to the chance that the US central bank will begin cutting borrowing costs at its next decision in March. 

Moreover, this makes the press conference of Fed Chairman Jerome Powell, and any signals he may or may not choose to send, of paramount importance. Particularity, it all comes down to how Powell and his colleagues read the latest wave of economic data. On the one hand, US inflation numbers are still surprisingly on the downside. Recently, the Fed's preferred measure slowed to 2.9% in December, dipping below 3% for the first time since early 2021, according to data released on Friday. 

On the other hand, consumer spending remains surprisingly strong. It is undoubtedly receiving a boost from the decline in inflation, but the strength remains may make some worry that price pressures may rise again. Regardless of the US Federal Reserve's decision, we will get more US data this week. Moreover, the most important will be the monthly US jobs report next Friday. Tuesday's job openings and consumer confidence data - and the release of the quarterly employment cost index on Wednesday, during the US Federal Reserve's meeting - will also help determine how strong the spending outlook really is. 

The US economy ended 2023 in a much stronger position than the markets expected, and analysts say this makes the possibility of an interest rate cut by the Federal Reserve before the third quarter highly unlikely. Recently, The US economy expanded by 3.3% on a quarter-on-year basis in the fourth quarter, down from 4.9% in the third quarter, beating market estimates of 2.2% growth. Obviously, the data reveals strong consumption as behind the result, with increases in discretionary consumption, including restaurants and leisure goods. 

Also, export growth which led by petroleum products, and state/domestic government spending, were major contributors to growth. On another level, a summary of the views of BOJ board members at its January meeting will provide further clues on how close the BOJ is to raising interest rates for the first time since 2007. Shortly, March and April are seen as very lively meetings. 

USD/JPY Technical Analysis and Expectations Today: 

According to the performance on the daily time frame chart above, the price of the currency pair US Dollar against the Japanese Yen (USD/JPY) is moving within an upward channel. As we mentioned before, stability above the 148.60 resistance will support the next strongest bull movement, the psychological resistance level 150.00. Technically, the technical indicators will begin to move towards Strong overbought levels. So far, we still prefer to buy the USD/JPY pair from every falling level, and the closest support levels for the currency pair are currently 146.60 and 145.00, respectively. 

Moreover, we expect a calm trading session today, with the economic calendar devoid of important and influential economic releases, whether from the United States or Japan. Therefore, investor sentiment regarding appetite for risk or not will have the strongest impact on the trends of the currency pair.