In response to the Federal Open Market Committee's (FOMC) decision to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent, the US Dollar has strengthened, impacting all major currency pairs. Traders are expected to closely monitor the currency market as significant economic data releases and price trends may impact currency valuations.
Overview
In response to the Federal Open Market Committee's (FOMC) decision to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent, the US Dollar has strengthened, impacting all major currency pairs. Traders are expected to closely monitor the currency market as significant economic data releases and price trends may impact currency valuations.
High Impact Economic Events
Friday Tentative: BOJ Policy Rate (JPY)
Friday Tentative: Monetary Policy Statement(JPY)
Friday 02:00 pm (GMT+0): Prelim UoM Consumer Sentiment (USD)
Technical Analysis
The USDJPY currency pair has been rallying since December 28, when the price bounced off the low of 140.249 and formed a Long-Legged Doji, indicating an upcoming uptrend. Subsequently, the low at 143.417 occurred higher than the previous low of 140.249, and prices exceeded the high of 145.979, signaling a bullish reversal known in technical analysis as a failure swing. Both the 50-period Exponential Moving Average (EMA) and the Momentum oscillator support the bullish outlook for the USDJPY. Specifically, prices are above the EMA, and the Momentum oscillator register values above the 100 baseline.
Potential Upside Targets
If the bulls manage to keep control of the USDJPY market, traders may consider the following three potential upside targets:
159.186: The initial upside target is 159.186, aligning with the R2 resistance level calculated using the weekly Pivot Point methodology.
160.218: The second price objective is 160.218, representing the 2024 all-time high reached on April 29.
162.927: The third upside target is 162.927, corresponding to the 261.8 percent Fibonacci Extension drawn from the peak at 157.707 down to the trough of 154.540.
Potential Downside Targets
If the bears manage to take control of the market, traders may find potential opportunities in the following four downside targets:
155.718: The initial support level is 155.718, corresponding to the daily low marked on June 12.
154.540: The second price objective is 154.540, aligning with the trough marked on June 6.
153.597: The third potential downside target is estimated at 153.597, representing the swing low marked on May 16.
151.857: An additional potential downside target is estimated at 151.857, representing the trough marked on May 3.
Fundamentals
During today's Monetary Policy Meeting (MPM), the Policy Board of the Bank of Japan unanimously agreed to establish the following guideline:
- The Bank will keep the uncollateralized overnight call rate around 0 to 0.1 percent.
- With an 8-1 majority vote, the Bank has decided to decrease its purchase of Japanese Government Bonds to allow for a more flexible formation of long-term interest rates in the financial markets.
During Wednesday's meeting, the Federal Open Market Committee stated that it anticipates reducing the target range once it is more confident that inflation is moving steadily toward 2 percent. To support its goals, the Committee has decided to keep the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.
On another note, according to the Bureau of Labor Statistics, the Consumer Price Index for all items less food and energy rose 0.2 percent in May, slightly below the 0.3 percent forecast, indicating a moderate price increase. Also, the Producer Price Index for final demand declined 0.2 percent in May, suggesting a decrease in the cost of goods and services. Prices for final demand less foods, energy, and trade services were unchanged in May following a 0.5 percent increase in April, a sign of stability in the market.
Conclusion
As the Bank of Japan and the Federal Reserve keep interest rates unchanged, the US Dollar Index has marked a rally of consecutive higher highs, impacting all major currency pairs. It is imperative that traders stay abreast of the latest geopolitical and economic developments, exercise caution, and maintain a keen eye on the market trends to make the most of their investments and avoid any potential risks or losses.