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  • On Wednesday, the USD/JPY is trading bullish at 109.788 amid the dovish FOMC and Federal Funds Rate from the US. 
  • The USD/JPY currency pair is on a bullish run, heading towards 109.900 and 110.096 resistance levels.
  • Forex trading market participants may look for a buy trade over 109.539 to target 109.880 and 110.060 levels.

The USD/JPY currency pair is on a bullish run, heading towards 109.900 and 110.096 resistance levels. The Federal Reserve has recently released the FOMC Statement and Federal Funds Rate. 

If you are interested in trading USD/JPY with forex robots, check out our guide.

FOMC Statement and Federal Funds Rate

According to officials’ consensus estimate, the Fed would keep its key short-term rate near zero this year. However, the Fed raise it modestly next year to around 0.3 percent and end 2023 at about 1%, above its June forecast of 0.5 percent to 0.75 percent. Nine of the Fed’s 18 members now expect at least one rate hike next year, up from seven in June. It’s indicating that the Fed may lift the rate by half a quarter-point, as is customary. According to officials, three raises are now expected in 2023, up from two in June and two more in 2024.

Officials at the Federal Reserve forecast that the economy will grow at a healthy 5.9% this year, down from their previous estimate of 7% in June. They anticipate 3.8 percent growth in 2022, up from 3.3 percent in their previous forecast. They expect unemployment to fall from 5.2 percent to 4.8 percent by the end of the year, up from 4.5 percent previously.

However, inflation has been rising faster than projected. The Federal Reserve expects its preferred measure of annual inflation to end in 2021 at 4.2 percent, up from 3.4 percent in June. Core inflation, which excludes volatile food and energy items, is expected to end the year at 3.7 percent, up from 3 percent previously.

Federal Reserve to keep buying $120 billion in Treasury bonds

The Federal Reserve said it would keep buying $120 billion in Treasury bonds and mortgage-backed securities each month to keep long-term rates low “until considerable further progress has been made toward” the Fed’s employment and inflation targets. For the second time in a row, the Fed stated that the economy had “made progress toward these goals.”

Fed Chair Jerome Powell said the economy had made “significant further progress” toward the Fed’s inflation target and “clear progress” toward its goal of total employment in a late August speech at the Fed’s annual conference in Jackson Hole, Wyoming. The Fed’s use of such phrasing sparked speculation that the monthly bond purchases would be reduced later this year.

The Fed also said on Wednesday that it will keep its key short-term rate around zero until the economy reaches full employment and inflation has risen beyond its 2% target for “some time.”

Despite the Evergrande issue, safe-haven demand has waned.

The USD/JPY was trading with a bearish bias amid a boosted safe-haven appeal. Market participants hope China’s government might soothe the problem by giving the real estate giant a deadline extension. If this happens, the increased interest of investors in bullion would quickly evaporate as it appeared in the market.

Evergrande is a Chinese real estate giant with over $300 billion in liabilities, making it the most indebted real estate company globally. The company has announced that it might not be able to repay its debts due this month due to a significant continuing decline in contract sales in the month, which has affected its cash flow and liquidity position in the market. 

If the real estate giant collapses, it will have a massive impact on industries worldwide. It will directly reduce Chinese demand for international products, commodities, and services. Therefore, it affects markets everywhere since China is a significant trading partner for over 100 countries worldwide.

FOMC Statement and Federal Funds Rate
USD/JPY 4-Hour Timeframe

USD/JPY Price Forecast – Daily Support and Resistance

Support Resistance

109.178 109.539

108.836 109.882

108.493 110.062

Pivot Point: 109

USD/JPY Price Forecast- FOMC Statement and Federal Funds Rate. 

On Wednesday, the USD/JPY is trading bullish at 109.788 amid the dovish FOMC and Federal Funds Rate from the US. The USD/JPY faces the next resistance at the 109.882 and 110.062 levels. The safe-haven currency pair is heading north amid weakness in the US dollar.

Technically, the USD/JPY is exhibiting bullish bias, and it may extend buying trend until the next resistance level of 109.880 level. Further on the higher side, the breakout of 109.880 exposes the pair towards the 110.062 level.  

The immediate support prevails at the 109.539 level on the lower front, and a breakout below this level extends the selling trend until the 109.350 support level. Further on the lower side, the breakout of 109.350 level can extend the selling trend until 109.178 and 109.836 levels. 

During the US trading hours, the Forex trading market participants may look for a buy trade over 109.539 to target 109.880 and 110.060 levels. All the best!

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