USD/JPY appreciates to fresh highs beyond 119.00 after Fed’s hike

• The dollar hits fresh 7-year highs beyond 119.00 after Fed's hike.
• The Federal Reserve raises rates to 0.5% and hints at six more hikes.
• USD/JPY seen rallying towards 122.90/123.00 – Credit Suisse.

The US dollar has jumped about 0.5% against the Japanese yen to hit fresh long-term highs above 119.00 after the Federal Reserve announced its decision to hike interest rates.

Fed’s rate hike pushes the US dollar higher

The greenback has extended its recent rally, pushing an already battered yen to hit fresh seven-year lows at 119.10.

The Federal Reserve has confirmed market expectations increasing the Federal Funds Rate by 25 basis points to 0.50% for the first time since 2018.

Furthermore, the bank has hinted at seven rate hikes in 2022, which would mean one at each remaining monetary policy meeting.

The Monetary Policy Committee notes that supply difficulties and the consequences of the COVID-19 pandemic have pushed inflation to its highest levels in the last four decades and that Ukraine’s invasion is highly likely to increase inflationary pressures and weigh on economic activity.

The rate hike has been approved by 8 votes to 1 with the dissenting voice of the St. Louis Fed President James Bullard, who wanted a 50-basis-point hike.

USD/JPY seen appreciating to 122.90/123.00 area – Credit Suisse

On a longer-term perspective, FX Analysts at Credit Suisse see further room for USD appreciation: “We maintain our long-held bullish outlook with resistance seen next at the 2018 highs at 118.61/66 and with 122.90/123.00 still our ultimate objective (…) Support at 116.35/10 now ideally holds, although only a close back below the 55-day average at 115.24 would warn of a ‘false’ break higher.”

Technical  levels to watch