The Fed delivered a widely expected 25-basis point rate hike on Wednesday, but the neutral interest rate guidance weighed on the US dollar. The sentiment that the Fed could be ready for a pause drove the USDJPY currency pair, also known as the Gopher, during the trading session helping it close 0.49% in the red.

The strengthening of the Japanese Yen in reaction to the signs of stress in the US regional banks following the announcement by PacWest Bancorp that it was considering strategic asset sales also weighed on the Gopher. However, the currency pair has found support around the 134.50 mark to cap a torrid three-day trading session as the investors shift their focus towards tomorrow’s US NFP report.

Technical

The lack of economic indicators from both economies will leave the Gopher to respond to yesterday’s Fed rate decision and the bets on tomorrow’s employment data. The 4H chart shows that the currency pair is trading below the 50-day moving average (50-EMA) and close to its dynamic support, which could provide support in the short term.

Should the current bearish sentiment persist, a potential could exist that the price action could break below the dynamic support and the 133.879 support level. However, due to the severity of the employment data due tomorrow, a potential could exist that the bears could fail to break below the 133.381 support level if the volume continues to decline.

For a bullish case, the bulls would try to push the price higher with elevated volume levels. The level of interest would be the 134.930 and 135.353 resistance levels.

Summary

The neutral guidance given by the Fed weighed on the US dollar, and with the lack of economic indicators in the US and with the Japanese economy closed today for the Greener Day holiday, the current sentiment could continue to drive the Gopher during the trading session. Therefore, a short-term trading opportunity could exist as the price action breaks below 133.879. However, it would need increased volume if it looks to test the 133.381 support level.

Sources: TradingView, Reuters.

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