USD/JPY drops modestly after Fed rises rates as expected

• Federal Reserve raises rates to 2.00%-2.25% as expected; Chair Powell to deliver press conference.
• USD/JPY fells but remain above daily lows.

The USD/JPY was hovering slightly below 113.00 before the release of the Fed’s decision and it dropped modestly afterwards. It bottomed at 112.76 and it was holding near the lows with a negative tone amid a slide of the US Dollar across the board, ahead of the release of the FOMC staff projections and Powell’s press conference.

The pair was still holding above daily lows and moving away from the 2-month highs it reached earlier at 113.04. US yields printed fresh daily lows after the statement. The 10-year fell to 3.06% while equity prices remained around previous levels.

The US central bank, as expected rose the key rate by 5bp. The statement contained a potential dovish twist as it removed the reference to policy being “accommodative”. Before the release of the statement, US President Trump said that Japan and the US have agreed to start trade negotiations.

USD/JPY Levels to watch

To the upside, resistance levels might be located at 113.05 (daily high), 113.15 (July highs), 113.35 and 113.60 (Dec 8, 2017 high). On the flip side, support could be seen at 112.70/75 (Sep 25, 26 low), 112.65 (short-term uptrend line), 112.40 and 112.15.