USDJPY – Fed Meeting Ahead With Range Highs In FocusYesterday’s Bank of Japan meeting saw the central bank act as expected. They kept interest rates unchanged and slowed the pace at which they will decrease monthly JGB purchases by half to help ensure market stability. This eventually assisted USDJPY to push higher and touch a peak early this morning at 145.44, matching a monthly high set on June 11th (145.46).
So far, this move to June range highs has been met with fresh selling, but there is still a lot for FX traders to consider moving into the Friday close, including an escalating conflict in the Middle East that has seen Israel and Iran exchange fire for six days in a row, and more importantly for wider financial markets, has drawn the full attention of President Trump and his national security team. How this situation evolves across the remainder of this week could influence the direction of USDJPY.
Also important could be the outcome later this evening of the Federal Reserve (Fed) Interest Rate Decision (1900 BST) and Press Conference (1930 BST). No change to interest rates is expected as policymakers, including Chairman Powell have been clear that they are currently in wait and see mode before making their next move, however their updated projections for US inflation, growth, and rate cuts may provide some extra volatility for USDJPY prices if these deviate from market expectations.
We shouldn’t forget it is also a holiday in the US tomorrow so liquidity could be reduced, so assessing the technical outlook, including relevant support and resistance levels may be useful.
Technical Update: Balanced Range Extends into Fed Meeting
Little has changed in USDJPY price activity from a technical perspective following Tuesday’s Bank of Japan meeting, and the focus now shifts to Wednesday’s Fed meeting in the US as the next potential sentiment driver for price.
As the chart above shows, the latest USDJPY activity has been held within a sideways range marked by potential support at 142.11, the May 27th session low, and potential resistance at 146.29, the May 29th session high.
This latest price activity may be an indication of trader uncertainty as to the direction of the next move and possibly the need for prices to ‘breakout’ and establish where the next directional risks might lay.
Of course, nothing is guaranteed and a closing break above resistance or below support might not see a more sustained phase of price movement, however being prepared is important.
Let’s consider the potential levels traders might find useful to watch if a breakout from the current sideways range is seen.
Potential Resistance Levels:
Successful closing breaks above 146.29 might be viewed by some as opening scope to higher levels and may possibly lead to a more sustained phase of price strength.
It’s at this time that the focus for traders may shift to the next potential resistance which could be at 148.65, the May 12th session high, even 151.21, the March 28th peak.
Potential Support Levels:
Equally possible within the current more balanced sideways price activity, is that a closing break under support provided by the May 27th low at 142.11 might well develop and be viewed as a potential negative breakout from the current sideways price range.
If closes below support at 142.11 are seen over the coming sessions, it might reflect for moves to even lower levels in price, with traders potentially shifting their focus to the April 22nd low trade at 139.89 as the possible next support.
The material provided here has not been prepared
accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
