USD/JPY bears move in again and eye close below 128.30 structure

USD/JPY is offered by some 0.5% and has fallen from a high of 128.95 to a low of 128.17 in Asia so far. The bears are out in force following the Federal Reserve event. The central bank raised interest rates for the eighth time in a year but slowed its pace to a quarter of a point. As a consequence, the US Dollar fell and gathered pace on the downside due to the Federal Reserve's dovish tilt, despite inflation, ''running very hot''. 

Fed's chairman Jerome Powell threw in the towel with dovish comments such as, "We can now say for the first time that the disinflationary process has started".

Jerome Powell's key comments 

"We can now say for the first time that the disinflationary process has started".

Powell speech: Very difficult to manage the risk of doing too little on rates

Powell speech: Disinflationary process is in early stages

Powell speech: History cautions against prematurely loosening policy

Powell speech: Well-anchored longer-term inflation expectations not grounds for complacency

Powell speech: Will likely have to maintain restrictive stance for some time

Powell speech: Very difficult to manage the risk of doing too little on rates

Powell speech: Policymakers did not see this as a time to pause

Powell speech: Will not be appropriate to cut rates this year according to our current outlook

This rhetoric will do the USD no favours and helps to provide a rather important floor underneath equity markets, supporting risk and propelling the Yen higher. ''The USD is stretched on a number of factors, but a catalyst to reverse it is more difficult to obtain than it was before this meeting,'' analysts at TD Securities argued.

''While re-acceleration risk (in growth/inflation) may be growing later this year in a soft landing outcome, the market is likely to push further USD weakness for the time being.''

Meanwhile, it is worth noting that the JPY net short positions dropped are at their lowest levels since March 202 as analysts at Rabobank acknowledged. ''Although speculators were disappointed that there was no tweak to the Bank of Japan’s Yield Curve Control policy at the January meeting, they are turning their attention to the next BoJ policy meeting in March.''

However, with US Dollar long positions having been off-loaded, speculators are more vulnerable to a positive outcome from this week's Nonfarm Payrolls.

USD/JPY technical analysis

As illustrated on the 4-hour charts, the price is below the trendline resistance and the bias is lower following the breakout of the geometrical structure. The bears are in control but are meeting a support structure near 128.30. If there is a bullish correction and a retest of the 129 area in a 38.2% Fibonacci, then should the bears move in, the focus will be on the 127.50s.