USD/JPY Forecast: A Fed’s surprise could spur some action

USD/JPY Current price: 103.77

• The ECB has tools to counter EUR’s appreciation if needed.
• The Japanese Leading Economic Index was revised to 96.4 in December.
• USD/JPY extends its consolidative phase amid dollar strengthening on risk aversion.

The dollar is up on menaces of intervention coming from different central banks. Not only the BOJ said it’s “vigilant” on the FX exchange, but also the ECB. Governing Council member Klass Knot said during the London morning that the central bank has the tools to counter EUR’s appreciation if needed. The shared currency plummeted, boosting demand for the greenback. The USD/JPY pair advanced just modestly as the headline spurred risk aversion, now trading around 103.80.

European equities fell into the red, but US Treasury yields hold ground, with the yield on the benchmark 10-year note steady at 1.04%. Japan published the final version of its November Leading Economic Index, which resulted in 96.4, below expected.

The US takes center stage, as the country will publish December Durable Goods Orders, foreseen up by a modest 0.9%. Later in the US afternoon, the US Federal Reserve will announce its latest decision on monetary policy, although no big changes are anticipated.

USD/JPY short-term technical outlook

The USD/JPY pair continues trading around its moving averages, which lack directional strength and remain confined to a tight range. Technical indicators seesaw around their midlines, another sign of absent demand. The Fed needs to surprise to provide a catalyst that could take the pair out of its lethargy, although chances are quite limited.

Support levels: 103.70 103.25 102.90

Resistance levels: 104.00 104.40 104.80

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