Jump to content

USD/JPY Technical Outlook: US Fed and BoJ Central Bank Preview

Recommended Posts


  • FOMC and Bank of Japan central bank preview
  • Federal Reserve Bank due to hike tomorrow but by how much?
  • USD/JPY technical analysis ahead of central bank meetings


Tomorrow marks a rather significant day in financial markets as the Federal Reserve Bank is scheduled to announce its first rate hike since the pandemic. Prior to the invasion of Ukraine, prominent FOMC members, particularly James Bullard, advocated for a rather aggressive approach to rate hikes, supporting a 50 basis point hike in March. Since then, market expectations seem to have settled on a more conservative 25 basis point hike (91% likelihood according to rates markets).

Implied Probabilities Derived from Fed Funds Futures

FED rate probabilities

Source: Refinitiv, prepared by Richard Snow


In addition to the interest rate hike, quarterly economic projections will be released. One thing to note is that the projections are likely to have been finalized before the invasion of Ukraine and may already be out of date. Keep an eye on the press conference for clarification on the dates the projections – all the information is on the DailyFX economic calendar.


The Yen has depreciated since the Ukraine invasion which came as quite a surprise considering its status as a safe haven. However, upon closer inspection Japan imports around 80% of its oil consumption, rising oil costs will further elevate import costs, placing downward pressure on the Yen. Japan joins a whole host of currencies that trade lower to the US dollar year-to-date.

A Reuters report citing someone close to the BoJ’s thinking mentioned that Japan is willing to tolerate a slow Yen depreciation but faster rates of depreciation are likely to demand closer attention to the issue.

global fx vs usd

Source: Refinitiv, prepared by Richard Snow

The US dollar has actually received a safe-haven bid and has remained elevated ever since the FOMC started talking up the probability of a March 2022 rate hike in response to multi-decade levels of inflation.


The USD/JPY has gained momentum since its topside breakout but has now reached the first level of resistance at the longer-term trendline resistance. The RSI rose to overbought levels, a possible signal of short-term exhaustion however, the dollar shows little sign of weakness.

A 25 basis point hike would come as no surprise and could see sustained support for the greenback. A 50 basis point hike would elevate the attractiveness of the dollar and could result in a move in USD/JPY towards 120.00.

Should we see a sizeable USD/JPY retracement, 116.30 would be the nearest level of support where bulls may be tempted to enter the bullish trend.

USD/JPY Daily Chart

USD/JPY daily chart

Source: IG, prepared by Richard Snow




--- Written by Richard Snow for DailyFX.com. 15th March 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Posts

    • Sainsburys full year earnings and Unilever’s first quarter trading update both say the same thing, UK consumers are in for higher prices. The war in Ukraine, supply chain issues and the effects of ongoing Covid all to blame.      
    • US Dollar (DXY) Daily Price and Analysis US Q1 GDP may stall the greenback’s advance. A 20-year high nears for the US dollar. The multi-month US dollar rally continues with the greenback printing a fresh high today ahead of the first look at US Q1 GDP at 12.30 GMT. The US dollar basket (DXY) has been boosted by renewed weakness in the Euro and the Japanese Yen, as investors move from lower-yielding to higher-yielding currencies, while safe-haven flows continue to benefit the greenback. The US growth release later in the session is expected to show a sharp slowdown from the robust Q4 figure of 6.9%. The markets are currently pricing in growth of just 1% for the first three months of this year, with the slowdown mainly due to a reduction in inventory accrual over the quarter. This release is unlikely to move the greenback, unless there is a large miss or beat, as the Fed believe that 2022 US growth will be robust enough to let them tighten monetary policy sharply without damaging the economy. The latest US Core PCE data – the Fed’s preferred inflation reading – is released on Friday and this may have more effect on the US dollar than today’s GDP data. For all market moving economic data and events, see the DailyFX Calendar. The ongoing US dollar rally has been aided by weakness across a range of G7 currencies including the Euro, the Japanese Yen, and the British Pound. The Euro continues to battle with lowly growth expectations, exacerbated by energy concerns, the British Pound is mired by weak economic data, while the Japanese Yen is in freefall as the BoJ continues with its ultra-loose monetary policy.   The US dollar continues to press higher and looks set to break above 103.96, the March 2020 high. Above here the US dollar would be back at levels last seen nearly two decades ago. The March resistance will likely hold in the short-term, especially with month-end portfolio rebalancing at the end of the week, but US dollar strength is set to continue in the months ahead. USDOLLAR (DXY) WEEKLY PRICE CHART – APRIL 28, 2022 {{THE_FUNDAMENTALS_OF_BREAKOUT_TRADING}} What is your view on the US Dollar – bullish or bearish?   Apr 28, 2022 | DailyFX Nick Cawley, Strategist
    • While Tesla has nothing directly to do with Elon Musk buying Twitter - TSLA stock closed down 12% on news that Musk may have to sell stock and use other holdings to stand against the loan to finalise the purchase of the social media giant.        
  • Create New...