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USD/JPY tags fresh cycle highs after FOMC minutes

This is a fresh cycle high for the USD after the FOMC minutes, which showed the Fed's determination to fight inflation.

The USD/JPY pair jumped toward 147 during the US session on Wednesday, bolstered by today’s FOMC minutes showing the central bank’s determination to fight inflation.

FOMC minutes meet expectations

Fed policymakers came to the conclusion that in order to decrease the high inflation, they would need to adopt and maintain a more restrictive monetary stance.

  • Many participants said it would be reasonable to maintain the policy at that level for a while once it had become sufficiently restrictive.
  • Many participants projected that as policies tightened, risks would grow more complex.
  • Many participants underlined the value of keeping a tight monetary policy for as long as required.

These minutes may be seen as being somewhat less hawkish than the Fed speakers’ rhetoric and leaning in the direction of a pivot:

“Several participants noted that… it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.”

According to the CME watch tool, the odds for a 75 basis points rate hike in November reached 96% after the Minutes.

You may also read: These 3 main reasons drove inflation sky-high

Earlier in the day, the Labor Department’s producer price index rose by 8.5% from January to September, slightly more than the expected increase of 8.4%. The reading was still below the 8.7% increase in August.

The headline CPI inflation data are due today, likely confirming the soaring inflation, probably prompting another wave of USD buying and selling in stocks/bonds.

BoJ ready to intervene?

As the yen breaks 146.00 on the charts vs the US dollar for new 24-year lows, Japanese Finance Minister Shunichi Suzuki is reiterating the government’s vocal warnings.

  • We haven’t changed our attitude and are urgently observing FX’s movements.
  • We are committed to taking the required action on FX if necessary.
  • The speed of the FX moves is crucial.

Read more: Paul Tudor Jones shows how to spot a market bottom

As long as the pair trades above previous highs (pre-intervention) of 145, the immediate outlook seems bullish. However, momentum will likely be slow as fears of another 500 pips decline could derail bulls.

USD/JPY daily chart, Source: Author´s analysis, tradingview.com

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