USD/JPY Forex Technical Analysis – Fed Rate Hike, Dulled Chances of BOJ Intervention Generating Bullish Tone

The Dollar/Yen is hovering near a 24-year high on Wednesday as U.S. Treasury yields remained firm ahead of an interest rate decision that is likely to set the tone in financial markets for months to come.

The Forex pair is being underpinned by traders betting on an aggressive rate hike by the U.S. Federal Reserve on Wednesday, followed by the Bank of Japan’s (BOJ) decision on Thursday to maintain its ultra-dovish monetary policy.

At 04:50 GMT, the USD/JPY is trading 143.991, up 0.274 or +0.19%. On Tuesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $65.05, down $0.21 or -0.32%.

Central Bank Expectations:  Fed Hawkish, BOJ Dovish

Ahead of today’s U.S. Federal Reserve policy announcements, due to be released at 18:00 GMT, traders have fully priced in a 75 basis point rate increase, with a 19% chance of a 100 basis point increase and a forecast for rates to peak around 4.5% by March 2023.

Meanwhile, the Bank of Japan is expected to maintain ultra-low interest rates and its dovish policy guidance.

Short-Term Outlook

Look for the USD/JPY to rally if the Fed hikes its benchmark interest rate 75 basis points as expected. The Forex pair could get a further boost from reports that indicated Japan will not intervene to stem the Yen’s decline until it reaches 150 per U.S. Dollar or higher.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 144.991 will signal a resumption of the uptrend. A move through 131.734 will change the main trend to down.

The minor trend is also up. A trade through 141.507 will change the minor trend to down. This will also shift the momentum.

The minor range is 144.991 to 141.507. The USD/JPY is trading above its pivot at 143.249, making it support. This is followed by another 50% level at 140.400.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 143.249 is likely to determine the direction of the USD/JPY on Wednesday.

Bullish Scenario

A sustained move over 143.249 will indicate the presence of buyers. This could trigger a surge into 144.958 to 144.991. Taking out the latter could lead to an acceleration into 146.780, followed by 150.000.

Bearish Scenario

A sustained move under 143.249 will signal the presence of sellers. This could trigger a steep break into the minor bottom at 141.507, followed by a 50% level at 140.400. This pivot is a potential trigger point for an acceleration into 137.702.