USD/JPY Fails to Test July High Ahead of Fed Rate Decision

US Dollar Outlook: USD/JPY

USD/JPY climbs to a fresh weekly high (148.81) as it continues to carve a series of higher highs and lows, but the exchange rate may consolidate ahead of Federal Reserve interest rate decision as it fails to test the monthly high (149.19).

USD/JPY Fails to Test July High Ahead of Fed Rate Decision

USD/JPY seems to be defending the advance from the start of the month as it stages a four-day rally, and the exchange rate may further retrace the decline from the April high (150.49) as Fed is anticipated to keep US interest rates on hold.

US Economic Calendar

The Federal Open Market Committee (FOMC) rate decision may sway USD/JPY even though the central bank is expected to retain the current policy as Chairman Jerome Powell and Co. warn that ‘increases in tariffs this year are likely to push up prices and weigh on economic activity.’

In turn, the FOMC may further combat inflation by keeping US interest rates higher for longer, and the decision may generate a bullish reaction in the Greenback amid waning expectations for an imminent Fed rate-cut.

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However, the FOMC may stay on course to further unwind its restrictive policy as the central bank still forecasts that the ‘appropriate level of the federal funds rate will be 3.9 percent at the end of this year,’ and more of the same from the committee may produce headwinds for the US Dollar as it fuels speculation for lower interest rates.

With that said, USD/JPY may struggle to retain the advance from the start of the week amid the lack of momentum to test the monthly high (149.19), but the exchange rate may further retrace the decline from the April high (150.49) should the bullish price series persist.

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/JPY on TradingView

• USD/JPY carves a series of higher highs and lows after failing to push/close below 145.90 (50% Fibonacci extension), with a breach of the monthly high (149.19) bringing 150.30 (61.8% Fibonacci extension) on the radar.
• Next area of interest comes in around the April high (150.49), but failure to push above the monthly high (149.19) may push USD/JPY back toward 147.10 (38.2% Fibonacci retracement).
• Need a move/close below 145.90 (50% Fibonacci extension) to open up the 144.40 (23.6% Fibonacci retracement) to 144.60 (50% Fibonacci extension) region, with the next area of interest coming in around the monthly low (142.68).

Additional Market Outlooks

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--- Written by David Song, Senior Strategist

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