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  • USD/JPY stabilizes after bouncing off 18-day low of 107.00.
  • FOMC kept monetary policy unchanged and revised down economic forecasts.
  • Fed Chair Powell showed readiness to use YCC if needed in future.
  • A light calendar could keep risk catalysts in focus.

USD/JPY consolidates the Federal Reserve-led losses while taking rounds to 107.10 during the pre-Tokyo open Asian session on Thursday. The pair slumped to the lowest since May 18 while testing 107.00 after the US central bank’s dovish appearance before a few hours. In doing so, the quote also printed three-day losing streak while declining below a short-term key support confluence.

The Fed knows how to play safe…

Despite keeping the interest rate at a record low, also suggesting it as unchanged until 2022, the US Federal Open Market Committee (FOMC) struck a bearish tone in its latest monetary policy announcement. The reason could be spotted in watered-down economic projections and Chairman Jerome Powell’s speech. The central banker showed readiness to act and even use the Yield Curve Control (YCC) measures if needed.

Although the even added weakness into the US dollar, Asian markets seem to retrace amid the initial hours and a light calendar. Even so, US President Donald Trump’s praise to the Fed’s action and comments from China’s Global Times occupied the line of updates. Additionally, US Vice President Mike Pence, in his interview with Fox Business, said that they will stand strong against China on trade.

It’s worth mentioning that the rush for risk-safety also took clues from the Organization for Economic Co-operation and Development’s (OECD) latest Economic Projections Report. The news released Wednesday cited downside fears for the global economy due to the coronavirus (COVID-19). The organization also anticipates a second wave and exerted additional burden on the risk barometers.

Amid all these catalysts, the US 10-year Treasury yields drop to the lowest in over a week while flashing 0.736% as a quote. On the other hand, Wall Street benchmarks closed in red, except for Nasdaq, following the early-day gains. Even so, the S&P 500 Futures seem to part ways while taking rounds to 3,187, up 0.10%, by the press time.

Moving on, the US-China tussle may reacquire the market’s attention amid a light calendar and become worth watching for a near-term direction. On the data side, the US Weekly Jobless Claims and Producer Price Index for May might offer intermediate moves to the pair traders.

Technical analysis

A sustained break of 50-day SMA and a three-month-old ascending trend line, USD/JPY gains extra space on the bears’ radar. As a result, the early-May top near 106.65 and the previous month’s bottom surrounding 106.00 become important to watch for during the further declines.

 

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