USDJPY Holds on to Support as Fed Keep Rates Steady, Despite Powell’s Dovish Remarks

Movement on USDJPY was limited in yesterday’s trading despite the much-anticipated FOMC interest rate decision. The currency pair traded between support at 104.80 and resistance at 105.14 the whole trading day. By the end of the New York session, USDJPY was slightly down by 8 pips from its opening price at 104.90. As of this writing, the currency pair is trading slightly higher from its opening price at 105.05, up from 104.86.

Just as expected, the FOMC kept its interest rate steady at <0.25%. There were also no changes to the central bank’s asset purchase program. However, Fed Reserve Chairman Powell remarked that policymakers would not hold back from using their “full range of tools to prop up the US economy until recovery from the coronavirus pandemic is complete.” To some market participants, this was taken as a sign that negative rates could still be an option for the Fed. However, this did not weigh down USDJPY. At least not yesterday.

Technical Analysis

On the 1-hour time frame, it can be seen that the sideways trading on USDJPY yesterday was enough for the currency pair to break resistance at the falling trendline (from connecting the highs of July 23 and July 28). If there are enough buyers left in the market, USDJPY could soon trade higher. Near-term resistance for the currency pair would then be at 105.67 where it peaked on July 28.

On the other hand, a strong bearish close below yesterday’s low at 104.76 could mean that there is still enough bearish momentum left in the market. Should this happen, we could soon see USDJPY fall to 103.08 where it bottomed on March 12, 2020.

USDJPY, 1-Hour Chart

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