USD/JPY halts the series of lower highs and lows from last week to mirror the rebound in UST yields, and the FED interest rate decision may lead to a near-term advance in the exchange rate.
but the exchange rate may continue to track the positive slope in the 50-Day SMA as theThe diverging paths between the Fed and BoJ should keep USD/JPY afloat as Chairmanand Co. show a greater willingness to implement a restrictive policy, and the exchange rate may stage another attempt to test theas long as the FOMC stays on course to implement higher interest rates throughout the remainder of the year.
However, the threat of a recession may push the FOMC to winddown its hiking cycle as the central bank tries to achieve a soft-landing for the US economy, and a shift in the Fed’s forward guidance may produce a bearish reaction in theif the central bank looks to hold the benchmark interest rate at neutral for the remainder of the year.
In turn, the outlook for Fed policy may ultimately influence USD/JPY as the BoJ remains reluctant to switch gears, but the tilt in retail sentiment looks poised to persist as traders have been net-short the pair for most of 2022.
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