USD/JPY falls as USD consolidates ahead of Fed meeting

• USD/JPY retreated slightly towards 147.70, and the bulls appear to be losing traction.
• US yields rise as markets expect a hawkish Fed pause on Wednesday.
• Investors are also awaiting new macroeconomic forecasts and the revision of the Fed’s dot charts.

At the beginning of the week, the pair USD/JPY recorded some losses and fell to 147.70, driven mainly by the weakness of the Dollar against its rivals. Both the Federal Reserve (Fed) and the Bank of Japan (BoJ) will meet this week on Wednesday and Friday, but no hikes are expected from either bank. The positions of Powell and Ueda will be closely followed. No relevant data will be published on Monday.

On the Fed’s side, markets anticipate that the entity will announce a hawkish stance, similar to the decision of the June meeting, in which the Fed decided to keep rates stable to evaluate the lags in monetary policy and its impact. in the American economy. In this sense, the banks will try to convince the market that they will continue to depend on the data, but that the tightening cycle is not over.

In line with this, US bond yields are rising across the curve and remain at high levels. The 10-year bond yield rose to 4.33%, while the 2-year yield is at 5.06%, up 0.50%, and the 5-year yield is at 4.46%.

On the other hand, the Bank of Japan (BOJ) has clarified that a change in monetary policy will only be considered once local wage and inflation metrics align with its expected results. Furthermore, amid the continued difficulties of the local economy and the added weight of Chinese economic problems, the central bank remains hesitant to modify its dovish stance. In this sense, the monetary policy statement will have to be closely monitored for clues about future guidance.

USD/JPY Levels to watch

Technical analysis of the daily chart suggests a shift towards a neutral to bearish outlook for USD/JPY, with signs of bullish exhaustion. The Relative Strength Index (RSI), which is in positive territory, suggests a possible equilibrium in the market with balanced buying and selling pressure. For its part, the moving average convergence (MACD) presents flat red bars. Furthermore, the pair is above the 20-day, 100-day, and 200-day SMA, suggesting that the bulls are firmly in control of the overall picture.

Support levels: 147.00, 146.60 (20-day SMA), 146.00.

Resistance levels: 148.00, 149.00, 150.00.

USD/JPY Daily Chart