For the second day in a row, the bulls are moving at the USD/JPY exchange rate, with strong gains that reached the 132.70 resistance level. It rebounded from the strong selling operations the currency pair was exposed to. It then pushed it towards the 129.50 support level, after the Japanese Central Bank surprised the markets with the start of tightening to confront harsh inflation. The rebound gains for the currency pair will be affected, with the return of liquidity to the markets, by the reaction from the content of the minutes of the last meeting of the US Federal Reserve and the US job numbers.
Key takeaways from the minutes of the Fed's December 13-14 meeting, which were released yesterday:
A number of officials stressed that the decision to raise by 50 basis points, after four consecutive increases of 75 basis points, “was not indicative of any weakening of the committee’s determination to achieve the goal of price stability” nor a judgment that inflation was continuing to slow.
The Fed warns financial markets not to underestimate the central bank's determination to lower inflation, with the bailiffs quoting the policymakers as saying: "Unjustified easing in financial conditions, especially if driven by a public misunderstanding of the committee's reaction function, would complicate the committee's efforts to restore stability." the prices "
The risk of higher inflation is seen as a "key factor" in shaping policy expectations.
The minutes give little hint as to whether the next rate hike is likely to be 25 or 50 basis points, saying the FOMC "will continue to make decisions in meeting".
The economic outlook was less subdued than at the previous FOMC meeting; Officials see the possibility of a recession as a "reasonable alternative to a baseline" after previously looking at odds close to 50-50.
Forecasts of the US dollar against the Japanese yen today:
- According to the performance on the daily time frame chart, the USD/JPY currency pair started to form an ascending channel.
- It still needs to break the resistance level 136.30 to exit the general bearish trend, taking into account that moving towards the psychological resistance level 140.00 is the most important to confirm the shift strongly upward.
- Over the same period of time, a move towards the support level 131.60 will be important for bears to have strong control over the trend.
- I still prefer to buy the dollar against the Japanese yen from every downward level.
The US dollar pairs will remain in waiting mode until the markets react to the announcement of the US job numbers tomorrow.
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