USD/JPY riding familiar support at 114.50 ahead of big FOMC event

Currently, USD/JPY is trading at 114.57, down -0.15% on the day, having posted a daily high at 114.90 and low at 114.53.

USD/JPY is testing the support line established at the start of the week meeting the 200 ema on the hourly chart at 114.48. The major ghas been in consolidation since supply met the 115.48 highs earlier in the week as markets get set for today's FOMC announcements and interest rate decision. A hike has been priced and a dovish hike or a no change to policy are the two most likely outcomes. A hawkish hike would surprise markets and could cause a rally in the dollar while the previous mentioned could spark a knee-jerk drop in the price leaving the 114 handle vulnerable. 

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"For the BoJ, the near-term outlook is slightly more uncertain with no anticipated changes to the short-term policy rate but considerable speculation surrounding the outlook for asset purchases, the 80trn annual pace of balance sheet expansion, and the potential for a shift in the 10Y yield target (currently 0%) to a range," explained analysts at Scotiabank, adding, "We are bearish JPY on the basis of relative central bank policy and interest rate differentials remain elevated with yield spreads hovering just below their recent multi-year highs."

The third risk to the yen taking into account its risk profile and the vulnerability to knee-jerk, haven-driven gains in periods of risk aversion, are the the Dutch election. The analysts at Scotiabank argued that this presents an added dimension of risk that is relevant to JPY’s return profile."

USD/JPY levels

Analysts at Commerzbank suggested that the USD/JPY's near term outlook is neutral to positive: "The market is sitting just above the 55-day ma, which is now acting as support at 114.18. It has for now stalled at the 115.62 mid-January high and the 13 count on the 240-minute chart does suggest a decent pull back," explained the analysts, adding, "Beyond this we look for a challenge to the key short-term resistance offered by the 16-month resistance line at 117.68 – and this remains our favoured view."