USD/JPY Bears Eye Sub-130 as Powell Comments Resonate
It is a quiet morning for the USD/JPY. There were no economic indicators from Japan for investors to consider today. The lack of stats leaves investors to react to the overnight Fed monetary policy decision, FOMC Projections, and the Fed Chair Powell press conference.
While easing bank contagion risk supported a USD/JPY return to 132 on Tuesday, Fed Chair Powell discussed the possible influences of the banking sector on monetary policy. In contrast to more hawkish FOMC Projections, the Fed adjusted its forward guidance to a less hawkish tone, returning the USD/JPY to test support at 131.
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While the Bank of Japan stands by ultra-loose monetary policy near term, Fed Chair Powell narrowed monetary policy divergence in favor of the Yen. The Fed Chair did reiterate the commitment to bring inflation to target. However, a credit crunch could do the work for the Fed.
USD/JPY Price Action
This morning, the USD/JPY was down 0.53% to 130.670. A bearish start to the day saw the USD/JPY slide from an early high of 131.490 to a low of 130.636.
Technical Indicators
The USD/JPY needs to move through the 131.791 pivot to target the First Major Resistance Level (R1) at 132.579. A return to 132 would signal a bullish USD/JPY session. However, the jobless claims figures need to impress to support a breakout.
In case of an extended rally, the bulls would likely test resistance at the Wednesday high of 133.002 but fall short of the Second Major Resistance Level (R2) at 133.789. The Third Major Resistance Level sits at 135.787.
Failure to move through the pivot would leave the First Major Support Level (S1) at 130.581 in play. However, barring an extended sell-off, the USD/JPY pair should avoid sub-130 and the Second Major Support Level (S2) at 129.793. The Third Major Support Level (S3) sits at 127.795.
Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The USD/JPY sits below the 50-day EMA (132.880). The 50-day EMA slid back from the 200-day EMA, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.
A USD/JPY move through R1 (132.579) would give the bulls a run at the 50-day EMA (132.880). A breakout from the 50-day EMA would send a bullish signal. However, failure to move through the 50-day EMA (132.880) would leave the Major Support Levels in play.
The US Session
Looking ahead to the US session, it is a relatively quiet day on the US economic calendar. US current account, jobless claims, building permits, and new home sales figures will be in focus. While housing sector data has drawn more interest in recent months, the jobless claims should have more influence on the USD/JPY pair.
Economists forecast initial jobless claims to increase from 192k to 197k. Sub-200k would continue to reflect very tight labor market conditions.