The Japanese yen (USD/JPY) spiked to the highest level since March as traders reacted to the Fed decision and Japan household spending numbers.
The Federal Reserve concluded its two-day meeting yesterday. The central bank decided to leave interest rates unchanged at 0.0%-0.25%, as it had guided in the past monetary policy meeting. It also committed to continue its quantitative easing in a bid to support the economy. Most importantly, the Fed said that it still has tools that it could deploy if the situation worsened.
Meanwhile, the USD/JPY is also reacting to the household spending data from Japan. According to the Bureau of Statistics, the country’s household spending increased by 3.8% in September leading to an annualised decline of 10.2%. The two figures were better than the 2.2% and -10.7% that analysts were expecting.
However, in a sign that Japan’s economy is under strain, overtime pay declined by 12% in September. In general, companies that are extremely busy tend to pay more money in form of overtime.
USD/JPY technical forecast
In a report earlier today, analysts at UOB, a Singapore-based bank, said that they believe that the current downward trend is overdone. As such, they expect the pair to dip to 103.30 but struggle to move below 103.00.
On the four-hour chart, we see that the USD/JPY price has been indeed on a sharp downward trend. It reached a low of 103.40 this morning. It remains below the 25-day and 15-day moving averages. Also, it is below the important support of 103.00, that is shown in pink. Similarly, oscillators like the Relative Strength Index (RSI) and stochastics have moved back to the oversold level.
Therefore, unlike what UOB analysts think, I agree with UOB analysts that the pair will continue falling today. But, I believe that bears will next target the psychological level at 103.00. For this trade, the stop or the invalidation point will be 104.00.
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USDJPY technical chart
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