Analysis USD/JPY: waiting for Fed's announcement
|USD/JPY Current Price: 108.41
- USD/JPY extends its consolidative phase ahead of the central bank's critical decision.
- Japanese adjusted trade deficit widened in May amid falling exports.
Majors are in consolidative mode this Wednesday, as, despite multiple political headlines that should have rocked the boat, investors are sidelined ahead of the US Federal Reserve monetary policy announcement. The USD/JPY pair trades around the 108.40 price zone, where it left on Tuesday after hitting a daily low of 108.05. Equities were sharply up in Asia following the lead of Wall Street, with US major indexes close to record highs. Stocks were underpinned by mounting speculation the ECB could cut rates and by comments from President Trump, who announced trade talks with China will soon resume. European markets, however, opened with a more cautious stance, hovering around their opening levels ahead of Fed's decision. Meanwhile, US Treasury yields ticked modestly higher, recovering to near their weekly opening levels.
In the data front, Japan released its May Merchandise Trade Balance, which resulted slightly better than expected by printing a deficit of ¥-967.1B. The Adjusted Merchandise Trade Balance, however, came in at ¥-609.1B vs. the expected ¥-2.2B. Both Imports and Exports decreased when compared to the previous month, by 1.5% and 7.8% respectively. The market is now waiting for the Fed's announcement that will take place mid-US afternoon. Speculative interest has been pricing in a rate cut in the US for this year and expects Powell & Co. to start paving the way toward a cut today. The wording of the statement and the dot-plot will hold the key.
From a technical point of view, the pair offers a short-term bearish-to-neutral stance, given that, in the 4 hours chart, it is trading below all of its moving averages, with the larger ones maintaining their bearish slopes above a directionless 20 SMA. Technical indicators in the mentioned time frame lack directional strength, currently consolidating below their midlines.
Support levels: 108.10 107.80 107.55
Resistance levels: 108.60 108.90 109.20
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