USD/JPY falls modestly following Fed rate hike

• USD/JPY holds to daily losses at the 140.40 area.
• Fed hiked rates by 25 bps as expected to 5.25% and left the door open for further hikes.
• Eyes on BoJ’s decision on Friday, expected to hold their dovish stance steady.

Following the Federal Reserve (Fed) decision, the USD DXY index continues to trade weak, near 101.19, and the USD/JPY stands with losses at 140.40. 

The Federal Reserve (Fed) announced that it hiked rates by 25 basis points (bps) to the 5.25%-5.50% target, as expected, its highest in 22 years. The statement noted that economic activity and the labour market remain robust and that inflation is elevated. In addition, the Federal Open Market Committee (FOMC) opened the door to further hikes as they will consider monetary policy lags and its implications on economic activity in the next decision.

Following the decision, the US Treasury yields traded mixed. The 2-year yield stands neutral at 4.89%, while the 5- and 10-year rates jumped to 4.16% and 3.90%, both slightly unchanged.

Live Coverage of Chair Powell Press Conference 

USD/JPY Daily chart

According to the daily chart, the technical outlook is neutral to bearish. On the positive side, according to the Moving Average Convergence Divergence (MACD), bears are losing ground as it is printing subtle red bars. On the other hand, the Relative Strength Index (RSI) fell below its midline and points south. On the bigger picture, the pair trading above the 100 and 200-day Simple Moving Average (SMA) indicated that the bulls are in command.

Support levels: 139.90, 138.70, 137.30(100-day SMA).
Resistance levels: 141.38 (20-day SMA), 142.00,143.00.