USD/JPY retreats from weekly high as Fed Chair Powell adopts a neutral tone

• USD/JPY hits a new weekly high of 149.96 before retreating 0.13% to trade at 149.75.
• Fed Chair Jerome Powell's dovish remarks led to a decrease in expectations for additional tightening by the Fed.
• Chances for a rate hike in January 2024 trimmed from 50% to 40% following Powell's comments.

USD/JPY turns negative after hitting a new weekly high of 149.96 but retreats 0.13% after dovish remarks of the US Federal Reserve (Fed) Chair Jerome Powell, amid a risk-on impulse, as seen by Wall Street’s posting gains. Therefore, the pair is trading at 149.75 at the time of writing.

USD/JPY shifts negative following dovish remarks from Jerome Powell

Jerome Powell’s words moved the markets, while expectations for additional tightening by the Fed faded, as the chances for a rate hike in January 2024 were trimmed from 50% on Wednesday to 40% on Fed Powell’s remarks.

Fed Chair Jerome Powell commented that the committee would proceed “carefully” in setting monetary policy, as evidence of above-trend growth would warrant further monetary policy tightening.  He added that the policy is restrictive and acknowledged that inflation remains too high. He said the labor market is too tight, and markets have been frontrunning the US central bank policy changes.

Data-wise, the US agenda revealed the tight labor market after unemployment claims for the last week hit 198K, below forecasts and previous figures, at 212K and 211K, respectively. Simultaneously, the Philadelphia Fed Manufacturing Index showed business conditions in the region are crumbling, sparking fears of a possible economic downturn.

On the Japanese front, exports rose to a record high in September, rising for the first time in three months, as auto factories increased their shipments to the US and Europe. Exports estimates were at 3.1%, but figures rose by 4.3%. In the meantime, Japan’s top diplomat, Masato Kanda, said there was an “international agreement” that authorities could intervene in the Forex markets if there were excessive moves.

USD/JPY Technical Levels