JPY – USD/JPY tests technical resistance, eyes on Japan's interest rate decision

The Federal Reserve held interest rates steady on Wednesday, as expected, stating that "unemployment remains very low, labor market conditions remain solid, and inflation remains moderately elevated." Two board members dissented from the decision. Powell said it was too early to say whether the Fed would cut rates at its next meeting in September, noting that current policy, while slightly restrictive, was not suppressing the economy. The ADP employment report released earlier in the day showed that private payrolls increased by 104,000 in July, exceeding expectations for a 75,000 increase.

The Bank of Japan will announce its interest rate decision today, with expectations of keeping rates unchanged at 0.5%. The trade deal between Japan and the United States has removed some uncertainty surrounding Japan's fragile economic recovery. Markets are focused on any indications from Bank of Japan Governor Kazuo Ueda about the possibility of another rate hike this year. The Bank of Japan is weighing ongoing growth risks stemming from tariffs against inflationary pressures from rising food costs.

As seen on the technical chart, the USD/JPY pair has encountered resistance near its 200-day moving average for several days in the middle of the month and is currently trading at 149.60. The RSI and Stochastics have also fallen accordingly, suggesting further potential for a correction. Nearest support lies at the 25-day moving average at 146.80. Based on July's cumulative gains, a 50% correction would occur at 145.90, while a 61.8% correction would occur at 145.10. Major support lies between the early month lows of 142.66 and 141.40. Resistance remains at 149.60, followed by the 150 mark and the 151.80 level.

Estimated Range:
Resistance: 149.60 – 150.00 – 151.80
Support: 146.80 – 145.90 – 145.10 – 142.66 – 141.40

Focus:
Friday
Japan's June Unemployment Rate (07:30)

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