2023-06-23 03:29

Federal Reserve (Fed) Chair Jerome Powell expressed support for further interest rate hikes in the US, emphasizing a cautious approach. Powell stated that rate cuts are not anticipated in the near future, and the Fed will wait until it is confident that inflation is on track to reach the 2% target. These remarks contribute to the US Dollar (USD) maintaining its recent recovery against the Japanese Yen (JPY) and provide additional support for the USD/JPY pair. However, slightly overbought conditions on the daily chart are limiting traders' willingness to enter new bullish positions and restricting potential upside. On the other hand, the Japanese Yen (JPY) is facing downward pressure due to a significant difference in monetary policy between the Bank of Japan (BoJ) and other major central banks, which is favoring the USD/JPY pair. The minutes of the April BoJ meeting revealed the board's commitment to maintaining ultra-low interest rates to support the fragile domestic economy. BoJ policymaker Seiji Adachi also dismissed the possibility of an early adjustment in the yield curve control policy, stating that it is premature to withdraw ultra-loose monetary policy given the uncertainty surrounding the price outlook. The fundamental backdrop favours a bullish view on the USD/JPY currency pair. However, a bearish MACD divergence in the 4-hour time frame chart suggests that the buying momentum of the pair is gradually slowing. From the 4-hour time frame chart, we see lower highs and lower lows formation in the MACD lines, which differs from the price movement of higher highs and higher lows. Furthermore, a subtle MACD divergence is also found in the 1-hour time frame chart. Short-term traders can take the opportunity to do a SELL to benefit from the short-term correction. In longer term, USD/JPY pair is still showing an upward trend. Long-term traders may also benefit from the short-term correction by buying around support level (provided the price did not break downward). Support level: SMA 20 trend line, 142.17 Resistance level: 143.20