USD/JPY Consolidates its Losses at Key Tech Levels

  • USDJPY
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USD/JPY Analysis

Last week's soft CPI inflation report sparked a dovish repricing in market expectations around the Fed's rate hike cycle. The central bank had previously hinted at a slower pace of tightening at some point, but is far from a pause. However, the next decision is a month away and officials will have the chance to assess two more inflation reports and a jobs report until then.

Recent Fed commentary shows some division among policy makers as to the next steps, but most seem to be contemplating smaller increases ahead, after a series of 75 basis points moves. Governor Waller (voter) said that recent data have made him "more comfortable" to consider a 50 bps adjustment, but expects hikes to continue in 2023. [1]

Ms George who is a voter this year but not in the next one, appeared more hawkish in her Wall Street Journal remarks, warning that officials must be careful "not to stop too soon". [2]

USD/JPY breached the lower border of the daily Ichimoku Cloud on Tuesday and remains in a perilous state, after its worst week in twenty-four years. The aggressive slump from last month's multi-decades high has exposed it to the 200Days EMA at around (135.47-134.60), but fresh catalyst will be required for a breach that would bring 130.38 in the spotlight.

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However, the pair finds support this week and the Bank of Japan remains committed to its ultra-loose monetary tightening, in stark contrast with the Fed and its major counterparts. As such, we can see a bounce back above 141.16, but USD/JPY does not seem ready yet to move past the strong resistance area of 144.40-90.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 17 Nov 2022 https://www.federalreserve.gov/newsevents/speech/waller20221116a.htm

2

Retrieved 26 Nov 2022 https://www.wsj.com/amp/articles/bringing-inflation-down-without-a-recession-might-not-be-feasible-fed-official-says-11668571133

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