USD/JPY approaches overbought conditions after FOMC minutes
-638278119566288150.png)
- USD/JPY trades near 146.30, seeing more than 0.50% gains on the day.
- The July FOMC Meeting Minutes showed members opening the door for further interest rate hikes.
- Rising bond yields are tractioning the USD.
The USD/JPY pair jumped above 146.00 on Wednesday, showing a more than 0.50% daily gain, as it continued to trade at its highest levels for nine months.
The Greenback strengthened on the back of investors placing hawkish bets on the Federal Reserve (Fed) raising interest rates higher, after the release, during Wednesday’s US session, of the minutes of the Federal Open Market Committee (FOMC) meeting in July. These stated members were considering another hike amid signs of upside risks to inflation.
The Yen, meanwhile, continued to trade vulnerable against its rivals amid monetary policy divergences, as the BoJ sticks to its dovish policy line.
The FOMC’s July meeting minutes revealed that participants still perceive inflationary pressures as quite high. As a response, members referred to keeping the door open for more interest rate hikes if upcoming data shows robustness.
That said, two participants favoured holding interest rates where they were for the time being. The overall stance appeared to support watching incoming data, just as Jerome Powell stated in its last press conference.
The US economy is giving reasons for the FOMC members to be concerned with inflation remaining sticky as rising economic activity and the hot labour market may eventually lead to more inflationary pressures.
In response to these developments, the US treasury yields for the 2-year, 5-year, and 10-year Bonds rose, increasing between 0.50% and 1%, contributing to a 0.20% daily gain in the US Dollar, as measured by the DXY index.
USD/JPY Levels to watch
Analyzing the daily chart, it is evident that USD/JPY is bullish in the short term.
The Relative Strength Index (RSI) is comfortably settled above its midline in positive territory, exhibiting an upward trajectory.
The presence of green bars on Moving Average Convergence Divergence (MACD) reinforces the growing bullish momentum.
Furthermore, the pair is above the 20,100,200-day SMAs, implying that the bulls retain control on a broader scale.
However, traders should be aware that indicators are near overbought conditions so a downward correction may be on the horizon.
Support levels: 145.00, 144.50, 144.00.
Resistance levels: 146.50, 147.00, 147.50.