USD/JPY hovers around 147.70, awaiting FOMC’s decision

• USD/JPY trades cautiously at 147.75, just off its YTD high, as traders await the Fed’s monetary policy decision.
• US Dollar Index dropped 0.36% to 104.82 amid falling Treasury yields, adding pressure on the Greenback ahead of the Fed meeting.
• Fears of Japanese FX intervention rise, with comments from US Treasury Secretary Janet Yellen and former Japanese Vice Minister Takehiko Nakao fueling uncertainty.

The USD/JPY remains subdued early in the North American session as traders brace for the US Federal Reserve’s monetary policy decision. Also, risks of an intervention by Japanese authorities in the Forex markets refrain buyers from opening fresh positions. At the time of writing, the pair exchanges hands at 147.75 after printing a new year-to-date (YTD) high of 148.16

Markets await Fed’s hawkish hold as Japanese authorities hint at currency intervention

USD/JPY price action remains flat, with traders waiting for Fed Chair Jerome Powell and Co. The markets expect a hawkish hold by the Fed, though the Greenback (USD) remains pressured, as shown by the US Dollar Index (DXY) at 104.82, dropping 0.36%. One reason behind the move is US Treasury bond yields, which are dropping, after hitting multi-year highs on Tuesday.

Besides delivering its rate decision, the Fed would update its economic projections for the rest of the year and 2024 and 2025. Investors must be keen to scrutinize their economic forecasts, which could add more volatility besides the headline. Downward revisions for the Federal Fund Rates (FFR) could be seen as a dovish reaction by the central bank. Meanwhile, keeping them unchanged could add to the mantra of maintaining rates “higher for longer.”

Aside from this theme, investors’ fear of a “possible” intervention by Japanese authorities is gaining traction. US Treasury Secretary Janet Yellen said she could understand Japanese authorities’ currency intervention if it was to control volatility.

In the meantime, a former Vice Minister of Finance for International Affairs in Japan, Takehiko Nakao, said the Bank of Japan should ditch its ultra-loose monetary policy and that Japan could intervene in the FX markets to support the Yen.

USD/JPY Price Analysis: Technical outlook

From a technical perspective, the USD/JPY is at the brisk of conquering 148.00 and extends its gains towards the October 31 daily high of 148.84, which, if cleared, the USD/JPY could re-test the 150.00 mark. Nevertheless, traders remain cautious of a possible intervention. On the downside, a drop below the September 20 low of 147.62 could pave the way to test the Tenkan-Sen at 147.03. Additional support levels emerge below the latter, with the Senkou Span A at 146.66 and the Kijun-Sen at 146.30.