USDJPY has been moving inside a consolidation pattern on its 1-hour time frame, as a descending triangle seems to be forming. Price made lower highs and encountered support around the 117.25 level. Stochastic is moving up, indicating that buying pressure is present.
With that, price could make its way back to the top of the triangle since it already bounced off support at the triangle bottom. If the resistance at the 118.50 minor psychological level holds, another test of USDJPY support could take place.
USDJPY Forex Outlook
In their latest policy statement, the FOMC sounded more hawkish than usual as they upgraded growth and labor forecasts. They also decided to drop the “considerable time” wording in discussing how long rates might stay low even after easing has ended. They emphasized that they “can be patient” in considering shifting policy back to normal, leading traders to project a rate hike for this year.
As for the yen, Japanese retail sales came in weaker than expected earlier today, as the report posted a mere 0.2% uptick instead of the estimated 1.1% increase and lower than the previous 0.5% gain. Event risks for this USDJPY trade later this week include the release of Japan’s core inflation figures, household spending data, and industrial production report.
The path of least resistance seems to be to the upside, as the Fed is the only major central bank looking to tighten monetary policy. Although the BOJ has mentioned that they are keeping policy unchanged for the time being, they could be open for further easing if inflationary pressures continue to decline.
Domestic demand in the US economy remains strong enough to shore up growth even if export demand is falling and the global economy could undergo a downturn. Risk aversion could also keep the US dollar supported across the charts, keeping USDJPY afloat in the process.
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