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A Fed decision on tap means we gotta watch major USD pairs!

Today I’m looking at USD/JPY’s short-term downtrend.

Before moving on, ICYMI, yesterday’s watchlist checked out NZD/CAD’s triangle consolidation ahead of New Zealand’s quarterly jobs release. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

Canada December GDP points to 1.6% annual growth in Q4 vs. 2.9% uptick in Q3

US CB consumer confidence lower from 109.0 to 107.1 in January

New Zealand’s jobless rate up from 3.3% to 3.4% in Q4, the highest in five quarters

Australia’s manufacturing PMI dips from 50.2 to 50.0 in January

Japan’s manufacturing PMI steadies at 26-month low of 48.9 in January

China’s Caixin manufacturing PMI improved from 49.0 to 49.2 in January

Asian stocks tracked Wall Street gains ahead of Fed decision

UK Nationwide house price index up by 1.1% y/y in January vs. 2.8% increase in December

Upcoming Potential Catalysts on the Forex Economic Calendar:

Eurozone’s flash CPI estimates at 10:00 am GMT
US ADP reports at 1:15 pm GMT
US ISM manufacturing PMI at 3:00 pm GMT

US JOLTS job openings at 3:00 pm GMT
FOMC statement at 7:00 pm GMT
FOMC presser at 7:30 pm GMT

AU building approvals at 12:30 am GMT
AU NAB quarterly business confidence at 12:30 am GMT

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

What to Watch: USD/JPY

USD/JPY 1-hour Forex Chart

USD/JPY 1-hour Forex Chart by TradingView

If you’re looking for more USD pairs to trade today then you should know that USD/JPY is testing the upper limits of its short-term downtrend.

USD/JPY is trading near 130.00 psychological handle, which is interesting enough before we consider that the area also lines up with December’s support zone and the 38.2% Fibonacci retracement of January’s downswing.

Will USD/JPY end a downtrend that started in late October? Or will USD bears have enough reason to drag the pair to new 2023 lows?

Today’s FOMC decision might make or break USD/JPY’s trend.

Markets expect the Fed to raise its interest rates by 25 basis points and they expect Governor Powell to do his best to discourage traders from pricing in interest rate cuts in the foreseeable future.

If Powell convinces traders that the Fed won’t turn dovish anytime soon, or if we see a buy-the-rumor, sell-the-news situation, then USD/JPY could break above its trend line resistance and retest areas of interest like 132.70 or 134.00.

But if today’s events convince markets that the Fed’s hawkishness has peaked and that there’s no way to go but down for interest rates, then USD/JPY would extend its downtrend.

Look out for a trip back to 127.25 or even new 2023 lows if you feel like there’s enough bearish momentum!