Basic overview
The US dollar strengthened yesterday, thanks in part to some forceful remarks from Fed Chairman Jerome Powell. The Federal Reserve’s decision was largely as anticipated, but one key statement stood out: “A December rate cut is not a foregone conclusion; in fact, we are far from it.”
Powell emphasized this multiple times, hinting at a significant internal debate within the Federal Open Market Committee (FOMC). It’s worth noting that those supporting a tighter policy easily outnumber those favoring a more accommodative stance. Ultimately, much hinges on incoming data, but Powell noted that if the necessary data isn’t available, then a December rate cut might not be prudent.
Before Powell’s remarks, there was a slight shift towards a more hawkish view on interest rates, with expectations for a December decrease falling from 90% to 70%. The total easing suggested by the market through the end of 2026 is 87 basis points, which still seems quite dovish when compared to the Fed’s own projection of just 50 basis points.
On the other hand, the Japanese yen weakened as expected, following the Bank of Japan’s decision to keep interest rates steady, although two members voted for a rate increase. Nothing unexpected transpired during the announcement. Bank of Japan Governor Ueda reiterated his concerns about trade uncertainties, shifting focus to upcoming wage negotiations. With the likelihood of a rate hike in December now at a mere 26%, expectations for any increase seem to have been pushed back, with March 2026 being the earliest possible timeframe.
USDJPY Technical Analysis – Daily time frame
Looking at the daily chart, it’s noticeable that the USDJPY has climbed above the resistance around 153.25, which aligns with previous highs and a key trend line. This suggests that buyers are increasingly optimistic, eyeing a target of 154.80. Conversely, sellers might look to establish a position for a price drop back below that resistance and revert to the 151.00 support level.
USDJPY Technical Analysis – 4 hour timeframe
When examining the 4-hour chart, the current breakout becomes clearer. There’s not much further to elaborate on, as buyers are focusing on pushing toward the 154.80 mark, while sellers are hoping for a dip below resistance to enable a potential pullback.
USDJPY Technical Analysis – 1 hour timeframe
The 1-hour chart reveals several upward trend lines that showcase the ongoing bullish momentum. Should the price reach these levels, buyers might feel inclined to support against the trendline, although there’s a palpable risk of a drop beneath it. Sellers, on the other hand, will target downward breaks to amplify their bearish strategies towards the 151.00 support. The red line indicates today’s average daily fluctuation.
Future catalyst
Tomorrow, we wrap up the week with the Tokyo Consumer Price Index (CPI) report.
