|

USD/JPY soars as Fed Powell’s hawkish stance fuels tightening speculations

  • Powell’s hawkish tone on inflation and rate hikes sends USD/JPY whipsawing, eyeing a test of the year-to-date high of 146.56.
  • Despite signs of disinflation, Powell insists there’s still a “long road ahead” to reach the Fed’s 2% target, adding uncertainty to the market.
  • Powell cites above-trend growth and a tight labor market as potential catalysts for further hikes in the Federal Funds Rate, keeping traders on their toes.

USD/JPY rallies after remaining within familiar ranges in a choppy trading session before the US Federal Reserve Chair Jerome Powell hit the stand and delivered hawkish remarks, putting into the table additional tightening. The USD/JPY is whipsawing around 145.70-146.50 as it eyes a test of the year-to-date (YTD) high of 146.56.

Federal Reserve Chair Jerome Powell’s hawkish tone propels the USD/JPY to new YTD highs

At Jackson Hole, the Fed Chair Powell said they are prepared to continue its tightening cycle if appropriate. He emphasized that the US central bank would be data-dependent and proceed “carefully” when deciding to pause or raise borrowing costs.

Regarding inflation, he said there’s a long way to go, despite two months of good data showing the disinflationary process continues towards the US central bank goal of a 2% target. Powell added they remain unsure about the neutral rate peak and acknowledged that monetary policy faces risks on both sides, meaning over and under-tightening.

Powell emphasized that the above trend growth and tightness in the labor market would be reasons to increase the Federal Funds Rate (FFR). He added that he expects July Personal Consumption Expenditure (PCE) at 3.3%, while core PCE at 4.3%.

USD/JPY reaction

The USD/JPY oscillated at around 145.70-146.10 on Powell’s remarks but gathered direction and rose to a new year-to-date (YTD) high of 146.63 before settling at around current exchange rates. Resistance on the upside is the 147.00 figure and the November 3 high at 148.45.

It should be said the Greenback (USD) is staging a recovery, as shown by the US Dollar Index, which turned positive, sits at 104.360, gains 0.35%, underpinned by US Treasury bond yields, which are beginning to track higher.

USD/JPY 5-minute chart

USD/JPY 5-minute chart

USD/JPY

Overview
Today last price146.57
Today Daily Change0.74
Today Daily Change %0.51
Today daily open145.83
 
Trends
Daily SMA20144.26
Daily SMA50142.77
Daily SMA100139.74
Daily SMA200136.65
 
Levels
Previous Daily High145.96
Previous Daily Low144.6
Previous Weekly High146.56
Previous Weekly Low144.65
Previous Monthly High144.91
Previous Monthly Low137.24
Daily Fibonacci 38.2%145.44
Daily Fibonacci 61.8%145.12
Daily Pivot Point S1144.97
Daily Pivot Point S2144.11
Daily Pivot Point S3143.62
Daily Pivot Point R1146.33
Daily Pivot Point R2146.82
Daily Pivot Point R3147.68

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

EUR/USD onsolidates around mid-1.1800s as traders keenly await FOMC Minutes

The EUR/USD pair struggles to capitalize on the previous day's goodish rebound from the 1.1800 neighborhood, or a one-and-a-half-week low, and consolidates in a narrow band during the Asian session on Wednesday. Spot prices currently trade just below mid-1.1800s, nearly unchanged for the day.

GBP/USD seems vulnerable near mid-1.3500s; UK CPI/FOMC Minutes awaited

The GBP/USD pair struggles to capitalize on the previous day's late rebound from an over one-week low – levels below the 1.3500 psychological mark – and trades with a negative bias for the third consecutive day on Wednesday. The downside, however, remains cushioned as investors seem reluctant to place aggressive directional bets ahead of the release of the latest UK consumer inflation figures and FOMC Minutes.

Gold regains positive traction after Tuesday's over 2% slump as traders await FOMC Minutes

Gold gains some positive traction during the Asian session on Wednesday and recovers a part of the previous day's heavy losses more than 2%, to the $4,843-4,842 region or a nearly two-week low. The intraday move higher could be attributed to repositioning trade ahead of the release of the FOMC Minutes. 

Top Crypto Gainers: Jito drops, Morpho holds steady, Convex Finance climbs

Decentralized Finance tokens, including Jito, Morpho, and Convex Finance, rank among the top-performing crypto assets over the last 24 hours. Jito dips on Wednesday after rallying 22% the previous day on the launch of a new mainnet node.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months. 

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.