USD/JPY plunges towards 136.50s post Fed 75 bps hike as Powell press conference starts

• The US Federal Reserve hiked rates by 75 bps.
• The central bank acknowledged that spending and production “softened.”
• USD/JPY: Tumbled to 136.80s as a reaction to the headline, but remains volatile, just below the 20-day EMA.

The USD/JPY slumped during the North American session after the Federal Reserve increased the Federal funds rate (FFR) by 75 bps in line with expectations. The Fed slightly tilted dovish as Powell and Co. acknowledged that spending and production softened while opening the door for further tightening. At the time of writing, the USD/JPY trades volatile in the 136.50-137.30 range.

Summary of the FOMC monetary policy statement

In the FOMC statement, policymakers conceded that production and spending had softened while the labor market remained tight. The statement’s first paragraph was perceived as dovish, as the USD/JPY slightly moved upwards while US bond yields edged lower.

Concerning inflation, Fed officials noted that inflation remains high and broadened further. The central bank expressed that the Russia-Ukraine war created further upward pressures on the already high inflation, while the central bank “strongly committed” to returning inflation to its 2 percent objective.

In the meantime, the Fed will continue reducing its balance, as planned in the Plans for Reducing the Size of the Fed’s Balance Sheet, issued in May.

USD/JPY Market’s reaction

The USD/JPY dipped below 137.00, and hit 136.83 before rallying towards 137.46. However, since then, the USD/JPY has been tumbling towards 136.60s as Fed Chair Jerome Powell has begun the Q&A session so traders might prepare for volatile swings until the end of the press conference.

Press conference here: Fed Press Conference: Chairman Jerome Powell speech live stream – July 27

USD/JPY Key Technical Levels