FxWirePro: USD/JPY poised for more downside, slower Fed rate hike expectations weigh

Chart - Courtesy Trading View 

USD/JPY was trading largely muted for the second straight session. The pair was hovering around 131.93 at around 40:30 GMT.

The US dollar started the week on the back foot as optimism weighed on its safe-haven currency status.

China continued to dismantle much of its strict zero-COVID rules around movement as it reopened its borders, boosting market sentiment.

US macroeconomic data published last Friday suggests the Fed could slow the pace of tightening.

The Fed raised interest rates by 50 basis points in the last meeting, but said it was likely to keep interest rates higher for longer to tame inflation.

Fed fund futures now suggest the most likely outcome for the Fed's February meeting is for a 25 basis- point increase.

Major focus will now be on the U.S. inflation data due on Thursday, where the outlook for price pressures will be crucial for investors.

Traders also await speech by Federal Reserve Chair Jerome Powell, where Powell is expected to shed more light on the path of U.S. monetary policy and economic growth.

Major Support Levels: 

S1: 131.72 (55-week EMA)

S2: 129.25 (Lower BB)

Major Resistance Levels: 

R1: 132.37 (5-DMA)

R2: 133.48 (21-EMA)

Summary: USD/JPY trades with a bearish bias. Scope for more downside. Decisive break above 21-EMA can change near-term dynamics.