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USD/JPY Maintains a Defensive Path Close to 130.00 After US Job Report, FOMC Direction Anticipated

US ADP Released

The USD/JPY currency pair got to trade with an averagely negative bias on Wednesday’s North American session. It was seen early in the session to hover close to 130.00 psychological benchmarks. This was immediately after the US Automatic Data Processing data got published on Wednesday.

The US Automatic Data Processing report revealed that the private sector created some 247,000 new jobs last month. It, however, fell short of the economic expectations that it would create 395,000 new jobs. But the short-fall was, somehow, offset in the upward tick that came in more than last month’s figures.

USD/JPY price chart. Source TradingView

The latest reading jumped 479,000 from 455,000 previously. The development had very little impression on traders. And as far as the USD/JPY currency pair is concerned, it got no meaningful momentum from the latest reading.

In considering the wider perspective, the price of a spot has started to oscillate within a narrow range. This has been the case since the beginning of the week while investors waited for new catalysts. The catalysts are necessary for clear directions before they position for more investment bets.

Therefore, attention will still be fixed on the result of the Federal Open Market Committee‘s two-day policy meeting. The decisions of the Federal Open Market Committee monetary policy meeting are expected later in the US session.

Fed Balance Sheet Reduced

It is generally expected that the US Federal Reserve will increase interest rates by up to 50 basis points. After the interest rates have been increased, the next agender of the reserve is to start cost reduction. The central bank has been under pressure for a while to reduce its balance sheet, amounting to almost $9 trillion.

The expected interest rate increase has been absolutely priced in by the market. This suggests that the market is going to watch out for clues from the Federal Reserve. The market needs to know if the central bank has plans to increase rates further if the economy dips again.

Aside from the stated facts, the market is poised to also analyze the statements of the Federal Reserve Chair, Jerome Powell. The Chairman’s press conference after the meeting is likely to give more hints about the direction of the policy. The comments would also play a significant role in influencing the US Dollar in the short term, as well as its price dynamics. 

Investors would also gain sufficient help in determining the short-term direction of the USD/JPY currency pair. But the divergence between the policies of the Bank of Japan and the US Federal Reserve favors bulls. It equally favors the possibility of prolonging the upward gains of the USD/JPY pair seen for about two months in a row.

The economic docket shown on Wednesday highlights the publication of the ISM purchasing Managers Index. Statistics from the index show that it is not so likely to generate many gainful opportunities to trade. The dovish stands of the Bank of Japan still put the Japanese Yen down.

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