USD/JPY remains steady at 107.40, unfazed by Fed’s minutes

• USD/JPY remains steady above 107.40, little moved after the FOMC minutes.
• The Federal Reserve confirms an accommodative policy and warns about the economic uncertainty. 
• Longer-term, the pair is expected to remain between 106.00 and 108.00

The US dollar ticked down from 107.47 after the release of the minutes of the Federal Reserve’s June 9-10 meeting, although it remains steady within previous ranges, hovering above trendline support at 107.40.

A muted reaction from the Fed's minutes

The Federal Reserve’s Monetary Policy Committee maintained its benchmark borrowing rate unchanged in the 0%-0.25% range and highlighted the need for a “highly accommodative monetary policy for some time”, discarding any rate hike in the foreseeable future. Furthermore, the committee states the need to communicate a more explicit form of forward guidance for interest rates and more clarity regarding purchases of Treasury securities.

Regarding the economic projections, the Bank foresees a 6.5% economic contraction in 2020 and a 5% growth in 2021, yet, warning about the “extraordinary amount of uncertainty and considerable risks to the economic outlook,”

USD/JPY expected to remain sideways between 106.00 and 108.00 – OCBC

From a wider perspective, Terence Wu, an FX strategist at OCBC, expects the pair to remains trading in a range, between 106.00 and 108.00, “For now, any extension towards the 200-day MA (108.40) should be rejected in favour of staying within the established 106.00 to 108.00 range (…) In the interim, the 55-day MA (107.43) should support on the downside.”