The USD/JPY market is remaining narrow ahead Fed meeting and Japan Monetary opinions. Market now seems to react to the US Federal Reserve announcement and US economic growth rate which are announced later today. US inflation expectations has been measured by the 10-year breakeven inflation rate, per the St. Louis Federal Reserve (FRED) data. In doing so, the risk barometer fades the one-week-old recovery moves, suggesting further hardships for the traders to predict the market sentiment.

The fall in inflation expectations as figures fall below market forecasts may be linked to the latest U.S. data on housing prices and durable goods orders, but previous readings have been corrected. This week’s meeting comes against the backdrop of a risky policy race by Federal Reserve Chairman Jerome Powell. Powell has bet that the central bank can design a more sophisticated task: keep the central bank’s key short-term rate close to zero, which means that from March 2020, until the labor market fully recovers, there will be no further stimulus for inflation.

US new home sales fell for the third consecutive month in June, falling 6.6% to reach their lowest level in more than a year. In this regard, the US Commerce Department reported that a drop in June sales left sales at a seasonally adjusted annual rate of 676,000. This followed a 7.7% drop in sales in May, and a 10.1% drop in April. The rise in prices may slow slightly as builders increase inventories. The number of new homes for sale at the end of June rose to 353,000, up 7% from May. The pace last month was 19.4% down from a year ago and the slowest since April 2020.

On the other hand Bank of Japan (BOJ) published the  ‘Summary of Opinions’ for the July month on latest. “Japan’s economy has picked up as a trend, although it has remained in a severe situation due to the impact of the novel coronavirus (COVID-19) at home and abroad.” The Bank of Japan must avoid prematurely tightening monetary policy as inflation remains short of its 2% target, one board member was quoted as saying in a summary of opinions from the bank’s July policy meeting. “There’s no major change to Japan’s inflation expectations even as commodity prices rise” was another opinion at the meeting, according to the summary released on Wednesday.

USD/JPY 4 Hour Chart:

Support: 109.45 (S1), 109.11 (S2), 108.64 (S3).

Resistance: 110.26 (R1), 110.73 (R2), 111.06 (R3).

Amidst this catalyst we have seen a downward pressure for the dollar-yen currency pair until the announcement of the US Central Bank, followed by the announcement of the growth rate of the US economy. We expect a bearish trend USD/JPY.