The FOMC will round up its meeting today with a decision on interest rates and a statement after that at 2 pm EST. FOMC Chair Jerome Powell will also face the media 30 minutes after the rate decision.
Having delivered on two quick-fire emergency rate cuts, the Fed is not expected to touch interest rates anytime soon. The focus of investors will be more on the scale of the quantitative easing program which the Fed has adopted. In its present form, it is already more far-reaching than the last program it launched nearly a decade ago.
The Fed is the 2nd central bank with a rate decision this week. The Fed has purchased nearly $2trillion in Treasury bills and opened several borrowing windows with unlimited guarantees. With these proactive steps, the Fed has managed to calm the markets, and the US stock indices have been on an upward roll since then.
Today’s meeting is likely going to focus on the speech by the FOMC Chair and the responses he provides to questions from reporters. Essential items to watch will be the Fed’s outlook, considering the latest employment, manufacturing and consumer confidence data. Also, some investors want to know what the plans of the Fed are with regards to the municipal bonds market.
Many analysts expect that today’s meeting may not provide anything extra, with the real focus being directed at the June 2020 meeting when sufficient time would have passed to assess the impact of the Fed’s measures in the general economy.
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The USDJPY typically shows a direct response to the FOMC decisions and the is the currency pair in focus. The last analysis I did for this pair showed a descending triangle pattern. The descending channel has now been breached to the downside, but the move has stalled at the 106.65 support. We need to see a double successive candle close below this support to confirm the breakdown of that price level, which provides an opportunity for a test of the larger symmetrical triangle’s lower border. A break of this border is required for 105.75 and possibly 104.56 to come into focus.
On the flip side, a bounce from current levels could target the 107.03 new resistance formed by the triangle’s lower border. Further upside brings 107.82 into focus, which invalidates the pattern. This could also provide a chance for the USDJPY to test the 200-SMA dynamic resistance. The 200-SMA also tallies with the 108.42 resistance. Above this level, 109.30 and 109.70 could become relevant resistance areas.