Fed Chairman Powell’s speech is crucial to trends
An overview of the movements of the USD/JPY pair on Tuesday
USD/JPY rose 0.16% on Tuesday. After a 0.50% gain on Monday, the USD/JPY pair ended the session at 150.314. The USD/JPY pair fell to a low of 149.926 before rising to a session high of 150.691.
Reuters Tankan Index in the spotlight
On Wednesday, the Reuters Tankan Index numbers for November will attract investors’ attention. The monthly survey includes 200 manufacturing companies and 200 non-manufacturing companies to assess business conditions.
Economists expect the index to fall from 4 to 3. A downward trend would be in line with the Bank of Japan’s (BoJ) concerns about the economic outlook.
Bank of Japan Governor Ueda spoke this week about the need for aggressive easing to deal with the uncertain economic outlook. Weaker numbers would support the Bank of Japan’s commitment to aggressive easing.
Federal Reserve Chairman Jerome Powell is in the spotlight
On Wednesday, Federal Reserve Chairman Jerome Powell will be in focus. Recent labor market indicators have indicated deteriorating labor market conditions. Unit labor costs and the US jobs report fueled speculation about the Fed ending its interest rate hike cycle and the possibility of a June 2024 Fed rate cut.
However, uncertainty resurfaced this week with US Treasury yields retreating from last week’s highs.
It is worth noting that the latest US labor market numbers came after the Federal Open Market Committee press conference. Powell spoke of the need for softer labor market conditions to support price stability. Confirmation that labor market conditions have eased sufficiently would fuel bets on the Fed ending its interest rate hike cycle. Significantly, markets will also increase the chances of an interest rate cut in June 2024.
While Fed Chair Powell will take center stage, investors should monitor other Fed speeches. Fed Vice Chairman John Williams and Federal Open Market Committee members Philip Jefferson and Michael Barr will also speak on Wednesday.
Short term forecast
USD/JPY’s near-term trends will depend on Fed speeches and the global macroeconomic environment. A hawkish stance from Fed Chairman Powell and signs of weakness in the Japanese economy are likely to support further gains for the USD/JPY. On the other hand, if the Fed adopts a dovish tone, it could lead to a potential decline towards 145.
USD/JPY price movement
Daily chart
The USD/JPY pair is holding above the 50-day and 200-day EMAs, confirming bullish price signals. A return of USD/JPY to 150.500 will support a move to the 151.889 resistance level.
Economic indicators from Japan and Fed Chairman Powell will be the focal point on Wednesday.
A break below the 150.201 support level would give bears an opportunity to make a move at the 50-day moving average and 148.405 support level.
The 14-day RSI at 54.97 indicates that USD/JPY is back at 151 before entering the overbought zone.
4-Hourly chart
USD/JPY is holding above the 50-day and 200-day EMAs, confirming bullish price signals.
USD/JPY’s move through Tuesday’s high at 150.691 will give the bulls a run at 151 and the 151.889 resistance level.
However, a break below the 50-day EMA would trigger the effect of the 200-day EMA.
The 4-hour 14-period RSI at 53.64 indicates USD/JPY returning to 151 before entering the overbought zone.
