USD/JPY breaks above 114.00 as Fed policymakers eye three-rate hikes

• USD/JPY edges higher after the Fed announced a faster QE reduction.
• Per dot-plot, Fed members eye three-rate hikes in 2022.
• On his press conference, Fed’s Powell said that the Fed could raise rates despite not achieving the full-employment goal.

The USD/JPY reclaims the 114.00 figure as the Fed decided to keep rates at the 0 to 0.25% range while increasing the bond-taper speed. Additionally, according to the dot-plot, the median estimates at least three hikes in 2022, in line with market expectations.

According to the Summary of Economic Projections (SEP), the Federal Reserve Board members, the median view of the Federal Fund Rates in 2022 is at 0.9%, in 2023 at 1.6%, and by 2024 at 2.1%.

US bond yields are rising in the bond market, with the US 10-year Treasury yield advancing two basis points, sitting at 1.46%, while the US Dollar Index rises some 0.11%, at 96.68. 

Key summaries of the Federal Reserve monetary policy statement

Adding to the abovementioned, the Federal Reserve decided the bond-taper based on “inflation developments and the further improvement in the labor market.” Also announced that the reduction will begin by January, with purchases of $40 Billion in US Treasuries and $20 Billion in mortgage-backed securities (MBS). Moreover, in line with the November FOMC monetary policy statement, it left the door open for further adjustments at the QE’s reduction pace.

Regarding the Omicron newly discovered strain, the Fed said that “risks to the economic outlook remain, including from new variants of the virus.”

At press time, Federal Reserve Chairman Jerome Powell is crossing the wires. He said that “Balancing of our goals means we could possibly raise interest rates before full employment is met, due to high inflation.”

Markets reaction

The USD/JPY reached a daily high near the 114.30s. However, the upward move was faded, as Federal Reserve Chairman Jerome Powell is crossing the wires.

To the upside, the next resistance would be the October 20 high at 114.70, followed by 115.00.

On the downside, the first support would be 50-DMA at 113.75, followed by the December 10 low at 113.21.