USD/JPY and a Look at 136 in the Hands of the FOMC Meeting Minutes

It has been a quiet day for the USD/JPY. There were no economic indicators from Japan for investors to consider this morning. The lack of stats left the USD/JPY in the hands of market sentiment toward Fed monetary policy.

While there were no stats to consider, Bank of Japan board member Naoki Tamura did draw attention, speaking of the risks of an inflation overshoot. Tamura reportedly talked about the timing for monetary policy normalization, saying,

“We’ll take into account economic, price, and wage developments at the time.”

Tamura also discussed the effects of extended periods of ultra-low interest rates on innovation and productivity while acknowledging the need to maintain the current accommodative policy stance.

On Tuesday, February service sector PMI figures from the US fueled fears of a more hawkish Fed, sending the USD/JPY to a session high of 135.228. While back at sub-135, downside risks remain for the Japanese Yen.

USD/JPY Price Action

At the time of writing, the USD/JPY was down 0.17% to 134.769. A mixed morning saw the USD/JPY rise to an early high of 135.059 before falling to a low of 134.550.

Technical Indicators

The USD/JPY needs to move through the 134.789 pivot to target the First Major Resistance Level (R1) at 135.432. A move through the Tuesday high of 135.228 would signal a bullish US session. However, the USD/JPY would need Fed chatter and the FOMC meeting minutes to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at 135.870 and resistance at 136. The Third Major Resistance Level (R3) sits at 135.951.

Failure to move through the pivot would leave the First Major Support Level (S1) at 134.351 in play. However, barring a Fed-fueled sell-off, the USD/JPY pair should avoid sub-134.000 and the Second Major Support Level (S2) at 133.708. The Third Major Support Level (S3) sits at 132.627.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The USD/JPY sits above the 50-day EMA (133.639). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA (133.639) would support a breakout from R1 (135.432) to target R2 (135.870). However, a fall through S1 (134.351) would give the bears a run at S2 (133.708) and the 50-day EMA (133.639). A fall through the 50-day EMA would send a bearish signal.

The US Session

It is a relatively quiet day on the US economic calendar. There are no US economic indicators for investors to consider today. The lack of stats will leave the Fed in the spotlight. Late in the US session, the FOMC meeting minutes will draw plenty of interest.

Following the latest round of US economic indicators and hawkish Fed chatter, the markets will dissect the minutes to gauge how far the Fed is willing to go. FOMC member chatter will also influence the dollar, with FOMC member Williams speaking late in the session.