We saw the US dollar slide yesterday after the FOMC statement. But there was nothing substantially dovish in the statement. The language was maybe slightly less upbeat, but it was also less concerned about disinflation. The rate hike is still on the table for mid-year, but the committee made it clear it wouldn’t be in April.
The USD/JPY was consolidating since last week when it tagged 122, breaking the 2014-high of 121.70. The 4H chart shows the coiling ahead of the FOMC statement and the sharp decline afterwords.
In the 4H chart, tThe RSI dipped below 30, which shows bearish momentum, and price fell below the 100-, and 50-period SMAs, which show some loss of the prevailing bullish bias. However, price appears to have found support at the 200-period SMA and respected a key support/resistance pivot around 119.50.
Now, if there is still more consolidation for the rest of the week, price should find resistance around 121-121.25, a common low in a previous coiling action and where the 50-period SMA resides at the moment. The RSI should also stay below 60 if USD/JPY is to continue a bearish correction mode.
The prevailing bullish trend is still intact and we should favor the bullish continuation scenario, since the FOMC and BoJ are still on different monetary policy paths.
Looking at the monthly chart we can see that if the current uptrend (since 2011-2012) extends, USD/JPY will see the 2007-high around 124 as the next key resistance.
This bullish trend should be respected, and only a break below the multi-month consolidation support at 115.50-116 should open up any bearish outlook outside of the near/short-term.
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