USD/JPY Hits Resistance after Fed Walked Back Williams' Dovish Comments

Given the negative sentiment towards the dollar and with safe-haven gold rallying, I wouldn’t be surprised if the USD/JPY resumed lower from here.

About two hours after Europe closed yesterday, stocks and bonds jumped while yields and the dollar dropped as the market's odds of a 50 basis point rate cut in July spiked to nearly three quarters. This was triggered by New York Fed President John Williams, who dropped the most dovish of hints in a speech. Only, the move lasted just a few moments as a Fed spokesman quickly came out to issue a statement that Williams didn’t intend to suggest that the Fed would be making a large interest rate cut at the FOMC’s upcoming meeting this month. So, down went the probably of a 0.50% rate cut again, to below 50%, which caused the dollar to rebound.

But the USD/JPY, which is stuck inside a short-term bearish channel, has now reached the lower bound of horizontal resistance between 107.70 and 107.90, an area which was formerly support. Thus given the negative sentiment towards the dollar and with safe-haven gold rallying, I wouldn’t be surprised if the USD/JPY resumed lower from here. The first bearish objective would be the liquidity that is now resting below 107.20, with the area below 106.80 being the subsequent objective.

Source: City Index and Trading View

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.