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Minimal Statement Changes and Hawkish SEP Lean Prompts Greenback Reprieve

  • Initial reaction higher in US yields and lower equities is boosting the greenback with the USD index back to unchanged on the day, rising roughly 0.4% since the FOMC statement release.
  • All focus now turns to Chair Powell's press conference where he will soon face questions from reporters about how convinced he is by the recent softening of inflation.
  • Given yesterday's broad USD selloff markets will look for clues to bolster the recent trend of USD weakness.
  • Despite the roughly 100 pip bounce for USDJPY, Tuesday's move lower signalled the end of the recent corrective phase that started on Dec 2. A continuation lower would open 133.63, the Dec 2 low and bear trigger.
  • A break of this level would confirm a resumption of the current downtrend and pave the way for a move towards 132.56, the Aug 15 low. The 20-day EMA, at 138.31, remains the first key short-term resistance.

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