Later Wednesday, the FOMC will be under the spotlight, amid expectations of multiple near-term Fed rate cuts. Will the Fed’s cut trigger a yen rally?
Economists forecast the FOMC to lower interest rates by 25 basis points. According to the CME FedWatch Tool, there is a 3.9% chance of a larger 50 bps rate cut. Unless there is a larger rate cut, the FOMC Economic Projections and Fed Chair Powell’s press conference will have a greater effect on USD/JPY.
A dovish 50 bps rate cut, with projections of two further cuts in the fourth quarter, could push USD/JPY toward 145. If breached, 140.309 would be the next key support level.
On the other hand, a 25 bps rate cut, with projections of fewer or no further rate cuts in the fourth quarter, could send the pair toward 148. A break above 148 would bring the 149.358 resistance level into play.
USD/JPY Scenarios: Hawkish BoJ vs. Dovish Fed Risks
Bearish USD/JPY Scenario: Hawkish BoJ cues or a dovish Fed rate cut could push USD/JPY toward 145.
Bullish USD/JPY Scenario: Dovish BoJ comments or a hawkish Fed rate cut could drive the pair toward 149.358.
Beyond USD/JPY, upbeat Aussie economic data continues to challenge expectations of multiple RBA rate cuts beyond November, influencing AUD/USD trends.
