The Fed remains cautiously hawkish. USD/JPY just below the 150 level

The dollar weakened after Powell's words yesterday. The main currency pair rose above 1,06 for a moment. The Fed chairman has made clear that the bank will continue to do everything possible to achieve its 2% inflation target. However, further interest rate increases this year are unlikely at this point. The Federal Reserve will proceed cautiously. The market has adjusted its valuation. American indices ended the day lower despite everything, they lost the most Nasdaq Composite, nearly 1 percent

The Fed has already done a lot of work

The market concludes from Powell's words that another increase in interest rates is hardly realistic. The head of the Fed pointed to great uncertainty and a number of risks and emphasized that Federal Reserve she has already done a lot of work so far. The institution therefore appears to have already reached the peak of the entire tightening cycle. Powell is, of course, a great diplomat and did not fail to point out that further decisions will depend on the data and at the moment another upward move cannot be completely ruled out. In short, the Fed remains cautiously hawkish.

Fed Fund Futures reduced expectations for a 25-bp rate hike in November to below 2%. and up to 26 percent in December. Currently, however, monetary policy is a kind of background for the market. Still the most important topic is geopolitical risk. Therefore, the dollar may gain at any time in the event of an outbreak of greater risk aversion. It will once again play the role of the currency of first choice or simply a safe haven.

Yen will remain weak?

Staying on the currency market, you should look at an interesting situation USD/JPY pair. The course is very close psychological barrier 150,00. In the past, there was intervention by the Ministry of Finance or the Bank of Japan when prices reached this level. The last time we saw such actions was at the beginning of October. The yen remains weak against the US dollar and there is no indication that this trend will change.

The chances that the BoJ will abandon its expansionary monetary policy are decreasing. It is true that inflation (3% y/y) has remained above the inflation target for a long time, but it reached its peak a few months ago. Core inflation (28, percent y/y) remains elevated, but here too a slow downward trend is visible. Tonight we learned the latest data on CPI indicators.

The USD/JPY chart shows a pattern that is confusingly similar to an ascending triangle gives you a greater chance of coming out on top. This would then mean a possible "attack" on the October 2022 peak, which was set around the level of 152,00, in the near future.

Source: Łukasz Zembik, OANDA TMS Brokers