USD/JPY bulls still in play but focus will switch to the downside on break of 138.80
|- USD/JPY bulls are hanging in there on the front side of dominant trenbd.
- Bears eye a break of trendline for downside continuation; FOMC minutes eyed.
USD/JPY is on the back foot and is testing 141.00 with a low of 140.90 so far. The US Dollar retreated across the board on Tuesday and remains on the offer in Asia. Investors are looking past worries about China's COVID flare-ups ahead of Wednesday's Federal Open Market Committee Minutes.
Equities and high-beta currencies were favored overnight, putting the US Dollar into a downward spiral. The DXY index, that measure the greenback vs. a basket of currencies was last seen down by over 0.5% near the lows of the day at 107.121. The S&P 500 was closing at its highest level in 2-1/2 months. The Dow Jones Industrial Average rose 397.82 points, or 1.18%, to 34,098.1, the S&P 500 gained 53.64 points, or 1.36%, to 4,003.58 and the Nasdaq Composite added 149.90 points, or 1.36%, to 11,174.41. US stock futures were little changed on Wednesday as investors braced for the latest Federal Reserve meeting minutes that could guide the US rates outlook. Meanwhile, there are prospects of a pivot from the Federal Reserve due to recent cooler-than-expected inflationary data within economic releases, notably the last US Consumer Price Index.
Investors will be parsing minutes from the Fed's November meeting for any clues about the December meeting and the outlook for interest rates thereafter with respect to the terminal rate. WIRP suggests a 50 bp hike on December 14 is still fully priced in, but the swaps are starting to gain price in around 30% odds of a terminal rate near 5.25%, according to analysts at Brown Brothers Harriman. ''Those odds will surely change after we get core PCE December 1, jobs data December 2, PPI December 9, and CPI December 13. However, it’s worth noting that the US economy continues to grow above trend in Q4 and the market should not underestimate the Fed’s need to tighten further.''
Analysts at TD Securities see the minutes shedding light on the FOMC's deliberations regarding the expected downshift in the pace of rate increases. ''With that said, policymakers will also emphasize that the terminal rate is likely edging higher vs prior expectations as the labor market remains overly tight.''
USD/JPY technical analysis
As per the prior analyses, USDJPY Price Analysis: Bull move in and eye 143.00 area, and USD/JPY Price Analysis: The bears are lurking around daily resistance, 140.50 exposed the pair is at a key juncture as the following analysis will illustrate:
In prior analysis, it was stated that so long as the price stays on the front side of the daily trendline, there would be prospects for a significant bullish correction in the days ahead.
Update:
The price is meeting the imbalanced area and has been resisted, so far.
The W-formation is a reversion pattern and if the price holds at the support of the neckline then there will be prospects of a move into the imbalance as illustrated above.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.