After the FOMC acknowledged inflation concerns, risk assets rose.
Chairman Jerome Powell highlighted his unhappiness with the lack of progress in “core services ex-housing” during the press conference following last night’s Federal Open Market Committee (FOMC) meeting, which caused a jump in risk assets. As market players gambled against the Fed’s capacity to maintain strict monetary policy, the yield on the US 10-year Treasury note and the value of the dollar fell.
Narrowing Interest Rate Differential Points to a Continued Decline in the USD/JPY
The declining rate disparity between the US and Japan shows a negative trend in the USD/JPY currency pair as bond yields are pushed down in expectation of upcoming reductions in interest rates.
Market Outlook for USD/JPY
The USD/JPY rose approaching downward-sloping trendline resistance before turning lower prior to the FOMC statement. Comparing this move to other important currency pairings, its relatively little impact may indicate that considerable reductions have already taken place.
The price levels of 129.40 and 131.35, both situated near the junction of the trendline resistance, are the important levels of resistance for the USD/JPY. A mood index on Friday and the publication of non-farm payroll data are just two of the market-moving events this week.