USD/JPY remains around 130.00 on a volatile session after US data, ahead of FOMC

• US Dollar tumbles during the American session as FOMC meeting kicks off.
• US yields move down, then rebounds, making USD/JPY volatile.
• The pair trades above 130.00 after hitting a fresh daily low at 129.73.

The USD/JPY tumbled and then redounded during the American session, but overall it remained in a familiar range, hovering around 130.00

Mixed US data

The surprise of the day so far was the influence of the Employment Cost Index (ECI). The numbers triggered price action across financial markets. The ECI rose 1% in the fourth quarter, below the 1.1% of market consensus. It points to a continuation of the slowdown in inflation. Following the report, the Dollar tumbled, Wall Street soared and Treasury yields rose.

A different economic report showed the S&P/Case-Shiller Home Price Index rose by 6.8% (y/y) in November below the 6.9% of market consensus and the 8.7% of the previous month. Conference Board announced the Consumer Confidence Index came in at 107.1 in January below the expected 109.0.

The two-day FOMC meeting has started. Market participants expect the Federal Reserve to raise interest rates by 25 basis points. The focus will be on the statement and the projections. Analysts will look for clues about the future path of monetary policy.

USD/JPY down, then trims losses

The USD/JPY bottomed at 129.73 after the ECI. It was rejected from under 130.00 as US yields rebounded amid risk appetite. It climbed to the 130.20 area. Despite the moves, the pair continues to trade within last week’s range.

A consolidation above the upper limit around 130.50 should clear the way to more gains while below 129.00, the slide could accelerate. Before the 129.00 zone, an intermediate support is located at 129.60.

Technical levels