Risk-On Reaction To FOMC Policy Announcement Dents Yen

Global equity markets received a boost Wednesday as participants judged that the Fed's tightening plans should not detail the economic recovery. Mr Powell & Co. accelerated asset purchase taper and used their dot plot to predict three rate hikes over 2022, but participants seemed to have confidence that policymakers can tackle inflation without inflicting much harm on the economy. The improvement in risk appetite fuelled USD/JPY purchases in NY hours, sending the pair past the Y114.00 mark and to its best levels since Nov 26.

• We are now awaiting the monetary policy decision from the BoJ, who are due to make their announcement on Friday.
• In the meantime, fresh data out of Japan showed that trade deficit expanded more than forecast to Y954.8bn in November, as both imports and exports improved. Notably, growth in shipments accelerated for the first time since May.
• USD/JPY has extended gains this morning, albeit it has already backed off session highs. The rate last sits +7 pips at Y114.11. A push through the 61.8% retracement of the Nov 24 - 30 downleg at Y114.38 would open up Nov 24 high & the bull trigger at Y115.52. On the flip side, losses past Nov 30 low of Y112.53 would allow bears to regain control.