USD/JPY Analysis: US Dollar Weakens After Statements from the Federal Reserve Chair

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Last night, the Federal Reserve's decision regarding interest rates was published, which, as expected, remained unchanged at 5.5%. The subsequent press conference by Powell was of particular interest to market participants.

According to CNBC, during the conference, the Fed Chair almost ruled out a rate hike as the next step, emphasizing the monetary policy's independence from the upcoming presidential elections. Additionally, he stated that:

  • Concerns regarding stagflation are exaggerated;
  • The Fed intends to lower rates smoothly and gradually;
  • The duration of maintaining high rates is increasing indefinitely.

The market's reaction to the Fed's news was a weakening of the dollar – apparently, concerns about another rate hike as the next step have diminished.

The dollar weakened significantly against the yen – the USD/JPY rate dropped from 157.50 to 153.10 yen per dollar yesterday evening (approximately -2.7%) in less than an hour, although the rate later recovered. The reason lies in the context, specifically the yen's strong strengthening on Monday, when the rate exceeded 160 yen per dollar, as we wrote on the morning of April 29. Perhaps there was another intervention yesterday?

However, official sources refuse to comment. Tokyo may be adhering to a tactic of keeping investors in the dark about its currency intervention strategy. Although, as reported by the Japan Times, fluctuations of 5 yen per dollar indicate interventions.

Today's technical analysis of the USD/JPY chart shows:

→ Following Monday's intervention (assuming it occurred), the USD/JPY rate rebounded from the lower boundary of the ascending channel shown in black;

→ At the rebound peak, the 158 yen per dollar level acted as resistance;

→ After yesterday's weakening of the US dollar, the rate broke below the previous week's minimum, falling below the median line of the blue channel.

Although the EMA 50 is above the EMA 100, a change in market sentiment can be assumed. This would be evidenced by the price consolidating below the short-term (black) channel, which would open the path towards the long-term (blue) channel's lower boundary.