USD/JPY rose 154 pips to a high of 142.15 for the day. The pair is showing a strong reversal after hitting a 2024 low of 139.59 yesterday.
USDJPY Daily
I am a little regretful because yesterday's crosshair reversal was a sign of a turnaround and I had some incentive to pull back with the Fed announcement looming, but that is in the past now.
So the question is whether the market is in equilibrium heading into the Fed and I think we are pretty close, but there is a chance Tokyo will follow suit with this price movement before stocks level off tomorrow.
Since the Fed's policy rate is aggressive, there is some risk of disappointment, which will lead to a knee-jerk appreciation of the USD. This should be offset to some extent by a sell-off in equities, which will cause USD/JPY to fall. Overall, however, USD/JPY should rise due to the Fed's hawkish stance, but after the statement, attention will immediately turn to Chairman Powell's press conference to see if he hints at a possible 50bps rate hike in November and/or shows a strong willingness to act aggressively against the threat of rising unemployment.
