The Fed’s hawkish remarks boosted the U.S. dollar across the board including against the Japanese yen.
Will USD/JPY see a deep enough pullback to present an attractive entry for the trend traders?
Here’s the 1-hour chart zone that we’re looking at:
USD/JPY 1-Hour Forex Charts by TV
In case you missed the FOMC event, you should know that the Fed paused its interest rate hikes in September as many had expected.
More interestingly, FOMC members still see at least one more rate hike in 2023. Not only that, but their “dot plot” projections point to a longer period of high-interest rates.
USD shot up across the board at the news and USD/JPY made new September highs.
Does USD/JPY have more room for gains?
Earlier today, Japan’s Chief Cabinet Secretary Hirokazu Matsuno talked about the importance of currencies “stably reflecting fundamentals” and warned that the government is monitoring currency moves “with a high sense of urgency.”
Profit-taking from yesterday’s strong moves and cautions against the yen’s sharp losses could inspire profit-taking from USD/JPY’s upswing.
We’re keeping our eyes peeled for a potential pullback to the 147.80 – 148.00 area that lines up with a broken resistance zone in the 1-hour time frame.
Take note that the area of interest is also near the 61.8% Fibonacci retracement of yesterday’s upswing as well as the 100 SMA on the chart.
Last but not least, a move to the 147.80 area would be in line with 1/2 of USD/JPY’s daily average volatility.
We can’t discount the possibility of a shallower pullback, however. If USD/JPY sees bullish candlesticks and then momentum from the 148.10 previous resistance and 38.2% Fibonacci level, then you can also consider entering a bit early while still aiming for new September highs for USD/JPY.