An alternative explanation is that US inflation figures and comments from Federal Reserve officials, including Chair Jerome Powell, that it is time to act on inflation, have put sharp focus on Wednesday’s Federal Open Market Committee (FOMC) meeting. The Fed is widely predicted to increase the amount of its monthly taper from $15 billion to $20 or $25 billion at the December 15 conclave. This would bring the end of the $120 billion program forward from June 2022 to April or March, depending on how the fractions are handled.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

The neutral aspects of the MACD (Moving Average Convergence Divergence) and the Relative Strength Index (RSI) are deceptive as is the declining momentum in True Range. All three are in contrast to the USD/JPY plunge two weeks ago. The MACD line is approaching the signal line from beneath and the diminishing gap is an alert to the buying opportunity, if not quite a classic instruction. Only a small rise in the USD/JPY will bring the MACD above the signal line. Unless the Fed abdicates all inflation responsibility on Wednesday that cross should happen next week. 

The 21-day moving average (MA) at 113.90 marked the week's high on Wednesday but its greater role is part of the resistance line at 114.00. The 50-day MA at 113.61 fronts resistance at 113.70. In total the two averages and the two lines form a substantial band of resistance stretching from 113.60 to 114.00. Support at 112.75 has held in six different sessions since the USD/JPY moved through 113.000 on October 11. That line remains the immediate base.

Currency markets have been waiting for several weeks for the US Federal Reserve to deliver a stronger anti-inflation policy. In that time the technical resistance above the current trading range has become substantial. If the Fed does not produce on Wednesday, USD/JPY long positions will likely be cut and the pair revert to its six-month base between 111.50 and 112.00.

King Dollar Seeking for Support Near 113.0

Dec 12 2021

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