USD/JPY Forex Technical Analysis – Sharply Lower after Powell Says Inflation Beginning to Ease

The Dollar/Yen is trading lower at the mid-session on Tuesday after Federal Reserve Chairman Jerome Powell said Tuesday that inflation is beginning to ease though he expects it to be a long process.

“The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy,” the central bank chief said during an event in Washington, D.C. “But it has a long way to go. These are the very early stages.”

At 18:23 GMT, the USD/JPY is trading 130.949, down 1.681 or -1.27%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) is at $71.40, up $1.13 or +1.61%.

The USD/JPY moved to its low of the session as Powell spoke as investors are hoping the Fed soon will halt the aggressive interest rate hikes it began last year.

In this remarks Tuesday, he gave no indication of when the hikes will stop, and said it probably will take into 2024 before inflation gets to a point where the Fed feels comfortable.

Daily USD/JPY Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 134.775 will change the main trend to up. A move through 127.227 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the momentum. A new minor top has formed at 132.900.

On the upside, the nearest resistance is a retracement zone at 132.700 to 133.992. This area stopped the rally at 132.900 on Monday.

On the downside, the closest support is a pair of 50% levels at 131.001 and 130.064.

Daily USD/JPY Technical Forecast

Trader reaction to the 50% level at 131.001 is likely to determine the direction of the USD/JPY into the close on Tuesday.

Bullish Scenario

A sustained move over the 50% level at 131.001 will indicate the presence of buyers. If this creates enough upside momentum then look for a labored rally into a minor pivot at 131.689, followed by a resistance cluster at 132.700 – 132.900.

Bearish Scenario

A sustained move under the 50% level at 131.001 will signal the presence of sellers. This could trigger a further break into another 50% level at 130.064. This is a potential trigger point for an acceleration to the downside.