US Central Bank Policies Will D

It must be taken into account that the USD/JPY pair has another important date on Friday when the Japanese central bank will announce its monetary policy update.

• For three trading sessions in a row, the price of the USD/JPY currency pair is exposed to profit-taking sales that pushed it towards the support level of 140.60 during today’s session, Wednesday, and its recent gains extended to the resistance level at 141.95.
• This performance awaits an event that is the most important for the US dollar pairs for this week, represented by the announcement of the update of the US Federal Reserve’s policy.
• This caused the US dollar to move strongly against the rest of the other major currencies throughout the year, and in the case of the currency pair, it is matched by the policy of the Japanese Central Bank, which has negative interest rates so far.

The strongest expectation is that the Federal Reserve will announce another hike in US interest rates today, as it tries to control high inflation. That would bring the federal funds rate into a range of 5.25% to 5.50%, its highest level in two decades, and above nearly zero early last year.

In general, high rates lower inflation by slowing down the entire economy and hurting stock prices and other investments. Investors are hoping that today’s move will be the final increase for this cycle because inflation has started to subside since last summer. Such hopes, along with a growing belief that the US economy can avoid a long-predicted recession, have helped stock markets rally strongly this year. The US labor market remained remarkably strong, allowing US households to continue spending and support the economy. Tuesday’s report showed that confidence among US consumers rose more than economists had expected.

But many on Wall Street warn that the Fed is unlikely to give any signs today that it has actually raised interest rates. Inflation remains high, even if it is somewhat moderate, and the economy may have to undergo a long but shallow recession if the Fed is to bring inflation back to its 2% target.

According to the performance on the daily chart below, and despite the recent selling, the general trend of the USD/JPY currency pair is still bullish and will remain so as long as it is stable above the psychological resistance at 140.00. There will be no reversal of the trend without moving the currency pair to the vicinity of the support level at 137.90. On the other hand, If the decisions of the Federal Reserve, the policy statement, and the statements of the bank’s governor, Jerome Powell, support the path of tightening policy, the bulls may find an opportunity to return to the vicinity of the psychological resistance at 145.00 again.

It must be taken into account that the USD/JPY pair has another important date on Friday when the Japanese central bank will announce its monetary policy update.

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