Japanese Yen Drops After FOMC: Price Setups in USD/JPY, AUD/JPY,

US Dollar, British Pound, Australian Dollar Vs Japanese Yen – Price Action:

USD/JPY is once again testing key resistance.
AUD/JPY has broken above a crucial ceiling.
GBP/JPY appears to have shifted to a higher gear.

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How to Trade USD/JPY

Higher for longer US interest rates, broadly improving risk appetite, and the surprise interest rate hikes last week by the Reserve Bank of Australia and the Bank of Canada reinforce the broader bearish setup for the low-yielding Japanese yen against some of its peers.

To be sure, the recent yen’s weakness continues to be more pronounced against currencies where central banks are in rate hiking mode, including the RBA, BOC, BOE, and ECB, but less so central banks have paused (Fed) or where central banks have indicated that rates are at a peak (NZD). For more discussion see “Making Sense of Japanese Yen’s Recent Slide: Is it the Start of a Renewed Leg Lower?”, published June 1, and “Japanese Yen Week Ahead as Fed Skip Bets Grow: USD/JPY, EUR/JPY, AUD/JPY”, published June 5.

The US Federal Reserve kept interest rates unchanged on Wednesday but indicated that the hiking cycle is not over and that rates may need to rise by as much as 50 basis points on slower-than-expected moderation in inflation and resilience of the US economy. Key focus now shifts to the Bank of Japan’s meeting on Friday – the Japanese central bank is expected to reaffirm the bearish bias for JPY by maintaining its ultra-loose monetary policy along with no changes to the yield-curve control policy.

The BoJ Governor Kazuo Ueda has reiterated the central bank will patiently maintain the easy monetary policy as there is some distance to sustainably achieving its 2% inflation target. Data released last week showed Japan’s economy grew more than expected in the January-March quarter, supported by domestic spending and a buildup in inventories.

USD/JPY Daily Chart

Chart Created by Manish Jaradi Using TradingView

USD/JPY: Running into crucial resistance

USD/JPY is once again retesting a stiff converged resistance: the upper edge of a rising channel from early 2023, coinciding with the end-2022 high of 142.25. Above the area, there is another hurdle on the median line of a pitchfork channel from January (at about 143.75). There is no sign of a reversal of the uptrend, and the rebound this month from crucial support at the March high of 137.90 points to upside risks for USD/JPY. The pair would need to break below the early-June low of 138.50 for the bullish pressure to fade.

AUD/JPY Daily Chart

Chart Created by Manish Jaradi Using TradingView

AUD/JPY: Cracks above a key ceiling

AUD/JPY has broken above a tough converged barrier on the 200-day moving average, coinciding with the February high of 93.00. The break has taken place on strong momentum, suggesting that the rally may have legs, potentially toward 96.50, the price objective of the rising channel since April.

GBP/JPY Daily Chart

Chart Created by Manish Jaradi Using TradingView

GBP/JPY: Shifts to a higher gear

GBP/JPY’s break above the median line of a pitchfork channel since February indicates the cross has shifted to a higher gear. The median line had served as stiff resistance in recent weeks and the break above reflects an acceleration in gains. Having said that, the cross is looking overbought pointing to some consolidation/minor retreat in the near term. The next resistance is on the upper edge of the channel (now at about 181.75).