FxWirePro: USD/JPY trades muted, Hawkish Fed rhetoric fails to lift dollar

Chart - Courtesy Trading View 

USD/JPY was trading 0.04% lower on the day at 132.54 at around 05:25 GMT, struggles to extend previous session's gains.

Hawkish Fed rhetoric fails to lift dollar, while investor hopes for China's emergence from the COVID-19 pandemic keep sentiment buoyed, weighing on the dollar.

FOMC minutes showed Fed committee members noted that "unwarranted easing in financial conditions" would complicate efforts to restore price stability.

The US dollar under pressure as investors torn between the Fed's hawkish tone and the support for riskier currencies driven by China's reopening.

Fed funds futures pricing shows the benchmark U.S. interest rate will peak just below 5% in May or June, before being cut back a little bit in the second half of 2023.

The yen on the other side remains bid  as traders expect this year will be one of policy tightening in Japan.

USD/JPY has bounced higher from multi-month lows at 129.50, holds above 5-DMA support. Price action hovers around 200H MA.

Major Support Levels: 

S1: 131.55 (5-DMA)

S2: 129.34 (Lower BB)

Major Resistance Levels: 

R1: 133.91 (21-EMA)

R2: 136.39 (200-DMA)

Summary: USD/JPY recovery attempts lack traction. Decisive break above 21-EMA will change near-term dynamics. Bullish continuation only above 200-DMA.