The Federal Open Markets Committee (FOMC) has in an unexpected unanimous vote, cut the Federal Funds Rate (i.e. the US interest rates) by 50bps to protect the US economy from the effects of the coronavirus. The Federal Funds Rate now stands at the 1.00% – 1.25% band.
The last time the Fed made an unexpected adjustment to the interest rate in an unscheduled meeting was on January 22, 2008. The USDJPY is now trading at 107.73 and is off its intraday highs. Fed Chief Jerome Powell is to hold a news conference at 11 am EST (i.e. 4 pm GMT).
The Federal Reserve interest rate cut is in fulfilment of Friday’s promise from the FOMC Chief that the bank was willing to use all tools at its disposal to protect the US economy from the coronavirus outbreak.
The pair is now trading below the 107.82 support level after the emergency rate cut by the US Federal Reserve. If the pair continues on its downward trajectory, the USDJPY could target the support zone that extends from 106.65 to 107.03. Below this area, the next support could come in at 104.56 in the medium-term.
On the flip side, price recovery of the USDJPY above the 107.82 support must be confirmed by a double daily candle close above this level. This could then open the door for further upside towards 108.42 and possibly 109.30 if upside momentum persists.