The U.S. dollar is moderately rising on Monday, as investors are assessing the prospects of the Federal Reserve’s (Fed) monetary policy after hawkish statements of its members.
Fed officials expressed a firm stance in their first comments after the central bank kept the rate unchanged last week.
The latest report on monetary policy to Congress indicates a rise in U.S. inflation above the target level and tightness in the labor market. According to Thomas Barkin, CEO of the Fed's Richmond office, further rate hikes might create a risk of a more severe economic slowdown. Along with CEOs of other Fed’s offices, he intends to tighten monetary conditions.
Investors are now waiting for Fed Chair Jerome Powell to speak to Congress on Wednesday and Thursday for additional signals on the future course of monetary policy.
According to the CME FedWatch tool, market participants estimate the likelihood of the Fed rate hike in July at about 72%.
Mo Siong Sim, currency analyst at Bank of Singapore, believes that raising rates in July could set the stage for further increases in October or November. By that time, inflation might have lowered significantly, and another rate hike would not be necessary, Siong Sim added.
On Friday, the Bank of Japan confirmed remaining the target rate at the level of -0.1% and limited 10-year bond yields at 0% in accordance with its monetary policy. On this background the Japanese yen has weakened against major currencies.
The USDJPY currency pair jumped to 7-month highs.
The price is in the formation of an ascending trend on the H4 timeframe.
The curve of the Relative Strength Index (standard values) shows divergence. The divergence between the indicator and the chart gives a leading signal of a trend reversal.
The value of the currency pair faced local trend resistance. A pullback from it will be a technical confirmation to sell.
The USDJPY Signal:
The short-term outlook suggests selling.
The target is at the level of 139.60.
Part of the profit should be taken near 140.95.
The Stop-loss is set at 143.15.
Bearish trend has a short-term character, so the trade volume should not be more than 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
