FOMC Minutes Preview: What It Means for the USDJPY

Summary:
• The FOMC minutes to be released tomorrow will show whether there is consensus among the board of the US Fed in pausing rates, or whether there is division.

Tomorrow at 7pm GMT, the FOMC minutes will be released. After the last meeting, the US Fed Chair had in his post-rate statement, indicated that the FOMC was ready to pause action on rates until the effects of the last three rate cuts on the US economy were assessed.

So what should investors be looking for in the FOMC minutes? US Fed Chairman Jerome Powell gave a series of speeches last week, where he alluded to the Fed taking a stance on allowing for a significant uptick in inflation (probably beyond the Fed’s own targets) before it would consider any interest rate increase.

Therefore, the FOMC minutes would reveal if this position was a consensus position among the FOMC members or not, given the fact that the previous rate easing actions were opposed by at least 2 board members.

Technical Outlook for USDJPY

The USDJPY continues to be capped by the major resistance at 109.30 on the daily chart, which corresponds to the 61.8% Fibonacci retracement and the previous highs seen on August 1 and October 30. The rising wedge on the daily chart is still intact, and the latest price move down from the 109.30 resistance to the lower border of the wedge reflects the consolidation of the pair within this pattern.

The FOMC minutes could be the latest driver for this pair. A USD-positive minutes (dissension in the rate pausing agenda within the FOMC board) could push the pair back up to retest the 109.30 level.

A break of 109.30 to the upside negates the wedge pattern and opens the door for a push towards 109.94 initially (March 28 low in role reversal and May 30 high). Continued upside push could target the78.6% Fibonacci level of 110.67 (May 28 high).

On the flip side, consensus among the entire FOMC board could be deemed to be a USD-negative event, which pushes the pair towards the July 29 and October 17 lows of 108.42 (50% Fibonacci retracement). Continued downward push below 108.42 confirms the downside break of the wedge and targets the July 3 and September 16 lows at 107.53. Below this level, the 38.2% Fibonacci retracement level at 106.68 becomes a target.