USD/JPY Forecast: Bulls retain control despite trading below 110.00

USD/JPY Current price: 109.96

• Japan’s trade deficit was wider than anticipated in May, printing at ¥-187.1 billion.
• The US Federal Reserve will present fresh economic projections.
• USD/JPY is technically bullish, but traders wait for the Fed.

The greenback is under mild selling pressure this Wednesday, although trading remains choppy ahead of the US Federal Reserve’s announcement later today. The USD/JPY pair trades in the 109.90 price zone, helped by softer US government bond yields. Equities lack clear directional strength amid the cautious wait-and-see stance and the absence of other fundamental drivers.

Meanwhile, Japan Prime Minister Yoshihide Suga would decide on Thursday whether to lift emergency measures. Data wise, the country published the May Merchandise Trade Balance Total, which posted a wider than anticipated deficit of ¥-187.1 billion. Machinery Orders in April were up 0.6% MoM and 6.5% YoY, missing the market’s expectations.

The US will publish May Housing Starts and Building Permits, yet the focus will clearly be on the central bank’s statement. Policymakers are widely anticipated to leave rates and QE unchanged. Attention will be put on the statement’s wording and any hint of tapering. Also, the central bank will publish fresh Economic Projections, which may also impact price action.

USD/JPY short-term technical outlook

The USD/JPY pair retains its bullish stance, despite trading below the 110.00 mark. The 4-hour chart shows that the pair is finding buyers around a bullish 20 SMA, which keeps advancing above the longer ones. In the meantime, technical indicators pared their declines above their midlines and are currently picking up. The slide may continue in the near-term if the pair extends its decline below 109.80.

Support levels: 109.80 109.35 108.90

Resistance levels: 110.30 110.75 111.05

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