FundamentalOverview

The USD got a boost from theFOMC decision as the market perceived it as morehawkish than expected. Overall, apart from some slight tweaks, the Fed matchedthe market’s pricing. Nonetheless, the market reacted in a big way pushingTreasury yields higher and giving the USD a tailwind.

The data is what reallymatters now as it will decide what the Fed is going to do. They switched theirfocus on inflation again, so it will likely take just one soft CPI report inJanuary to see the market reacting in a dovish way sending Treasury yields andthe US Dollar lower.

On the JPY side, the BoJleft interest rates unchanged as expected but Governor Ueda delivered a lesshawkish than expected presser. In fact, he placed a great deal on wagedata to decide on the timing of the next rate hike and added that the trendwill become clearer in March or April.

This made the market toprice out the probabilities for a hikein January and push back once again to the next meeting which is scheduled forMarch.

USDJPYTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that USDJPY extended the rally into the 158.00 handle following a slightlymore hawkish FOMC decision and a more dovish BoJ announcement. This was adeadly mix for the pair as the bullish momentum picked up strongly.

From a risk managementperspective, the buyers will now have a better risk to reward setup around the trendlinealthough we will need some weak US inflation data to push the pair so muchlower.

USDJPY TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, we cansee that the price is now testing the previous high. This is where we canexpect more aggressive buyers stepping in with a defined risk below the levelto position for an extension into the 160.00 handle next. The sellers, on the otherhand, will want to see the price breaking lower to start targeting the minor upwardtrendline around the 155.00 handle.

USDJPY TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, we cansee more clearly the price reacting to the 156.75 level as the buyers pile in.There’s not much else to add here as the buyers will look for a bounce and thesellers for a break lower. Watch out for the US PCE report today as a misscould trigger a pullback in the pair. The red lines define the average daily range for today.

UpcomingCatalysts

Today, we conclude the week with the US PCE data.

See the video below