FxWirePro: USD/JPY comatose above 200-DMA, anxiety soars ahead of Fed’s policy meet

Chart - Courtesy Trading View 

USD/JPY was trading in tight ranges with session high at 137.09 and low at 136.46 at around 04:35 GMT.

Fears of recession join the market’s cautious mood ahead of the key data/events to underpin the US Dollar’s haven demand, limiting downside.

The recently firmer data signal that the Fed might continue the current pace of interest rate hikes. 

Data Released so far: 

• Producer Price Index (PPI) matched the market forecasts of 7.4% YoY for November versus 8.1% prior. 
• Core PPI rose to 6.2% YoY versus 6.0% expected and 6.7% previous readings. 
• Preliminary readings of the University of Michigan’s (UoM) Consumer Sentiment Index rose to 59.1 for December versus 53.3 market forecasts and 56.8 final readings for November. 
• US ISM Services PMI improved to 56.5 versus 54.4 expected.

Looking forward, major attention will be on the US CPI and the Federal Open Market Committee (FOMC) as the hawkish bets on the Fed increased of late.

As per the consensus, the US headline inflation due for release on Tuesday is seen unchanged at 7.7%.

Precursors for US inflation suggest hawkish rate hike announcements from the Federal Reserve. That said, Fed policymakers warn that the continuation of a bigger rate hike regime could accelerate financial risks.

Major Support Levels: 

S1: 135.13 (200-DMA)

S2: 134.41 (Lower BB)

Major Resistance Levels: 

R1: 138.29 (20-DMA)

R2: 139.51 (110-EMA)

Summary: Technical bias for the pair is neutral with scope for some upside as long as pair holds above 200-DMA. 

Breach below could plummet prices, while on the flipside, retrace above 21-EMA is required to see upside resumption.