USD/JPY consolidates at the next key level of support post Fed drop

• USD/JPY is trading with a range of between 110.57/75, consolidating the move from the Fed.
• USD/JPY dropped below the trendline support and now takes on the next key support at current levels.

Market participants had been looking for a slightly hawkish tilt to the dots only to find that the Fed doesn’t see a rate hike happening until sometime in 2020. This sent the dollar lower.  The DXY dropped from above 96.50s and cut out a fresh low below the 28th Feb lows, losing the 96   handle  for the first time since then. The US 10 year yield dropped sharply to 2.52% from 2.59%, having traded as high as 2.61% pre-Fed. At the same time, the Fed’s balance sheet run down will end in Sep and many did not expect such to happen as soon as that – GDP forecasts were also downgraded.

Stocks on Wall Street ended mostly lower Wednesday, following a negative start for the session. One of the biggest weights at the start of the day came with a bearish opening gap in the shares of FedEx Corp. FDX that had been as low as 168.70 at one point, falling from yesterday’s close of 181.49 – The stock is often viewed as a barometer of global growth prospects – (The logistics company missed Wall Street forecasts for its fiscal third quarter).

• S&P 500 SPX, -0.29% ended 0.3% lower near 2,824.
• Dow Jones Industrial Average DJIA, -0.55% shed more than 140 points, or 0.5%, to finish near 25,746.
• The Nasdaq Composite COMP, +0.07% managed a gain, ending 0.1% higher near 7,729.  

Key notes from the Fed:

The latest median Federal Reserve forecasts:

• 2019 GDP 2.1%  vs 2.3% in Dec.
• 2020 GDP 1.9% vs 2.0% in Dec.
• 2021 GDP 1.8% vs 1.8% in Dec.

From the statement

Federal Reserve issues FOMC statement – March 20 – full text

• On a 12-month basis, overall inflation has declined, largely as a result of lower energy prices; inflation for items other than food and energy remains near 2 percent.
• On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little change.
• The Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent.
• The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes.  
• In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.

USD/JPY levels

From a technical point of view, Valeria Bednarik, the Chief analyst at FXStreet explained that the pair is now bearish in the short-term, as in the 4 hours chart, it broke below its 100 and 200 SMA, below this last for the first time since early February. Technical indicators in the mentioned chart head south almost vertically, now in oversold territory, as the pair lost roughly 100 pips in a couple of hours.   The decline is now set to continue as long as the pair remains below 111.00.

• Support levels: 110.45 110.10 109.80
• Resistance levels: 111.00 111.45 111.80