The USD/JPY fell to its lowest level since March when traders responded to the Fed’s decision.
The bank left interest rate and quantitative easing policies unchanged.
Data from Japan showed that household spending improved slightly in September.
The USD/JPY has fallen for the last three consecutive days as traders responded to the Fed’s decision, the U.S. election and Japanese wage numbers. It is trading at 103.44, down 1.80% from the weekly high of 105.35.
USD/JPY Hourly Chart
Federal and US elections
The biggest movement in the USD/JPY this week was the US election. Although the final results have not yet been released, analysts and people in the gaming market believe that Joe Biden has the upper hand. He already leads by a wide margin in most states. However, if you look at the electoral college, Donald Trump has a short path to re-election ahead of him.
A win for Biden is seen as negative for the US dollar. In fact, the dollar index has fallen almost two percent from its weekly high of $94.29.
The pair is also reacting to the Fed’s interest rate decision. In yesterday’s decision, the bank left the interest rate unchanged in the 0.0% and 0.25% range. They have been in this range for the past seven months.
In addition, the bank left its policy of quantitative easing unchanged and warned that the situation for the American economy remains dire. In a statement, Jerome Powell, chairman of the US Federal Reserve, stressed that the bank had more instruments at its disposal to support the economy. In a statement to Bloomberg, Stephen Stanley of Amherst Pierpont said
“This leaves the door open for something new, either in terms of changing the pace or composition of asset purchases, or introducing new guidelines on the subject at future meetings.
Japanese household spending
The USD/JPY exchange rate is also moving based on Japanese household spending data. According to the country’s statistical office, household spending increased at a monthly rate of 3.8%. This was better than the 2.2% increase that the analysts surveyed by Reuters had expected. It was also an improvement over the 1.7% increase of the previous month.
On an annualized basis, spending decreased by 10.2%. This was better than the 10.7% decline that the analysts had hoped for.
Overtime pay, which is an important indicator of the strength of Japanese companies, fell 12% in September, while average cash earnings fell 0.9%.
Technical outlook for USD/JPY
USD/JPY technical table
On the daily chart, we can see that the USD/JPY has been on a strong downward trend lately, and is now at its lowest level since March 12th. The pair has also moved below the 50-day and 25-day exponential moving averages. It is noteworthy that the pair has moved below the descending range shown in green. Hence, I believe that the bearish trend will continue as the bears are looking for the next support at 103.00. Become a better trader with our free forex trading courses.