Fed Chair Jerome Powell. Image source: Federalreserve, flickr.com
More bullish pressure was registered on the dollar in the early hours of today's session following Fed Chair Jerome Powell's testimony before Congress. To learn more about the current state of the greenback, have a look at our newest EURUSD analysis.
Powell testified on the Semi-Annual Monetary Policy Report yesterday before the House Financial Services Committee. As was expected, he stressed FOMC's readiness to lift the interest rate later this month in a bid to curb inflation. This bolstered the already elevated demand for the greenback in the short term, as the war in Ukraine intensifies.
USDJPY 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the 4H chart above, the USDJPY is currently attempting to break out above the 23.6 per cent Fibonacci retracement level at 115.665. The strong buying pressure is highlighted by the Stochastic RSI indicator, which is threading in its overbought extreme.
If the breakout is successful, the price action will re-test the previous swing peak at 116.300. If not, a minor pullback to the 38.2 per cent Fibonacci at 115.248 may follow next.
The latter is about to converge with the 100-day MA (in blue) and 50-day MA (in green), making it an even stronger support. That is why it is unlikely for a deeper correction to unfold in the near future.
Powell adopted a much more hawkish stance
Chair Powell presents the semiannual Monetary Policy Report to the House Financial Services Committee via livestream: https://t.co/XsYt5kSWeI
— Federal Reserve (@federalreserve) March 2, 2022
Watch Live: https://t.co/sGcjnHKWf8
Consumer prices are soaring globally, which is why the FED needs to recalibrate its stance. The war in Ukraine poses the threat of deepening supply constraints worldwide, which could exacerbate the situation.
"With inflation well above 2 percent and a strong labor market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month."
Meanwhile, the latest row of sanctions imposed on Russia is likely to add to investors' fears of a protracted conflict in the region, thereby boosting energy demand even further.
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