USD/JPY Rebound Unravels with Fed Rate Decision on Tap
The Federal Reserve interest rate decision may prop up the US Dollar as the central bank is expected to retain the current policy.
Share this:
US Dollar Outlook: USD/JPY
USD/JPY pulls back ahead of the 50-Day SMA (146.78) to snap the recent series of higher highs and lows, but the Federal Reserve interest rate decision may prop up the US Dollar as the central bank is expected to retain the current policy.
USD/JPY Rebound Unravels with Fed Rate Decision on Tap
USD/JPY approaches the monthly low (142.88) after showing a kneejerk reaction to the US Non-Farm Payrolls (NFP) report, and the exchange rate may continue to give back the advance from the start of May as it appears to be tracking the negative slope in the moving average.
Join David Song for the Weekly Fundamental Market Outlook webinar.
David provides a market overview and takes questions in real-time. Register Here
In turn, USD/JPY may struggle to retain the rebound from the yearly low (139.89) as the ongoing shift in US trade policy raises the threat of a recession, and the exchange rate may may stage further attempts to test the 2024 low (139.58) as President Donald Trump argues that ‘the Fed should lower its rate.’
US Economic Calendar
Nevertheless, the 177K rise in US NFP may keep the Federal Open Market Committee (FOMC) on the sidelines as Chairman Jerome Powell insists that ‘we do not need to be in a hurry to adjust our policy stance,’ and more of the same from the Fed may generate a bullish reaction in the US Dollar as the central bank continues to combat inflation.
However, the FOMC may stay on track to further unwind its restrictive policy as the ‘median participant projects that the appropriate level of the federal funds rate will be 3.9 percent at the end of this year,’ and swings in the carry trade may sway USD/JPY as the Fed keeps the door open to implement lower interest rates.
With that said, USD/JPY may struggle to retain the advance from the start of the month as it pulls back ahead of the 50-Day SMA (146.78), but the exchange rate may threaten the negative slope in the moving average should it further retrace the decline from the April high (150.49).
USD/JPY Price Chart – Daily
Chart Prepared by David Song, Senior Strategist; USD/JPY on TradingView
- USD/JPY snaps the recent series of higher highs and lows following the failed attempt to push/close above the 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension) region, and lack of momentum to hold above the monthly low (142.88) may push the exchange rate towards the yearly low (139.89).
- A close below the 140.50 (61.8% Fibonacci retracement) to 141.50 (38.2% Fibonacci extension) zone opens up the July 2023 low (137.24), but the exchange rate may continue to hold above the 2024 low (139.58) should it defend the advance from the monthly low (142.88).
- Need a close above the 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension) region to bring the around 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone on the radar, with then next area of interest coming in around the April high (150.49).
Additional Market Outlooks
British Pound Forecast: GBP/USD Selloff Stalls Ahead of BoE Meeting
Gold Price Falls Toward 50-Day SMA
Canadian Dollar Forecast: USD/CAD Vulnerable to Fresh Yearly Lows
Australian Dollar Forecast: AUD/USD Pulls Back Ahead of December High
--- Written by David Song, Senior Strategist
Follow on Twitter at @DavidJSong
Related tags:
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
Have Markets Found a Turning Point Ahead of the Elections?
Fed rate-hike bets topping 70% have pressured markets, including precious metals and U.S. indices, toward key support levels. Could these levels signal a turning point ahead of the U.S. midterm elections?
EUR/USD Analysis: Euro Confidence Remains Limited After the ECB
The trading week is approaching its end and, for now, a neutral tone continues to dominate the euro's short-term price action. EUR/USD has recorded a move of only around -0.15% during the week, highlighting the pair's inability to establish a clear direction in favor of either the euro or the U.S. dollar.
USD/CAD Analysis: Canadian Dollar Strength Returns After Fed and BoC Decisions
With just one trading session left before the week comes to an end, the strength that has recently emerged around the Canadian dollar has once again become relevant. This can be observed in the recent performance of USD/CAD, which has declined nearly 0.3% over the last two trading sessions.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.