The USD/JPY pair defended the trendline connecting March lows and August lows, neutralizing the immediate bearish outlook, and may turn bullish if the Fed minutes show that policymakers are willing to raise rates above the neutral level.

The US central bank will publish the minutes of the September meeting, where it raised rates for a third time this year, at 18:00 GMT.

The minutes are likely to reaffirm the Fed's longstanding call of gradualism in policy tightening, and may offer insights on the neutral interest rate level (neither expansionary not contractionary) and whether most policymakers are willing to push rates above that level.

Most Fed officials put the neutral level close to 3 percent and more importantly, the dot plot published in September showed that nearly all officials see interest rate above the neutral level (in restrictive territory) by 2020.

Further, the likes of Chicago Fed President Charles Evans, a renowned dove, recently called for two more rate hikes (50 basis points) above neutral level. This has triggered speculation that the Fed is likely preparing markets for restrictive interest rate policy.

However, the sharp rise in the treasury yields is starting to weigh over the stocks. Notably, the Fed tightening has caused strains across the EMs. And last but not the last, President Trump has criticized Fed for raising rates too fast.

As a result, the central bank may avoid upping the ante on rate hikes for now. However, if the minutes do reveal a growing consensus among officials for above-neutral rates, then the US dollar will likely surge across the board.

On the other hand, the greenback could take a beating if the minutes reaffirm gradual rate hike path and reveal growing concerns among officials about trade tensions and their negative impact on the economy.

Technically speaking, the path of least resistance for the USD/JPY remains on the higher side as long as the rising channel is intact.

Weekly chart

As can be seen, the pair fell sharply last week, confirming a bearish doji reversal, however, the solid rebound from the lower edge of the rising channel or trendline sloping upwards from the March lows has saved the day for the bulls.

The bullish case would strengthen if the pair clears the immediate resistance at 113.18 (July highs). In that case, the dollar bulls will likely have a go at the recent high of 114.55.

On the downside, a close below the rising channel support would validate the bearish doji reversal and shift risk in favor of a deeper drop below 110.00.

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