• The USD/JPY pair rebounded as markets awaited a hawkish FOMC policy meeting.

• The US retail sales report showed an unexpected jump of 0.7% in November.

• Japanese exports increased faster than expected in November.

The USD/JPY forecast shows a rebound hours before the FOMC policy meeting. The dollar recovered after upbeat sales data pointed to continued resilience in the US economy, while the yen eased ahead of the Bank of Japan policy meeting. 

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After dipping in the previous session, the USD/JPY pair rebounded as markets awaited a hawkish FOMC policy meeting. Traders expect the central bank to lower borrowing costs by 25-bps. However, policymakers might take a hawkish stance on the future due to economic resilience and looming Trump policy changes. 

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The US economy has remained strong, with most economic reports beating expectations. On Tuesday, the US released its retail sales report, which showed an unexpected jump of 0.7% in November. Meanwhile, economists had predicted a 0.6% increase. This resilience has led to more cautious remarks by policymakers that have supported the dollar in recent weeks. 

At the same time, the Trump administration will take office in January. Markets expect policy changes that will likely support the economy and boost inflation. Therefore, the Fed might have to assume a gradual pace for rate cuts. 

In Japan, data on Wednesday revealed that exports increased faster than expected in November. Nevertheless, it was not enough to change the policy outlook. Markets expect the Bank of Japan to maintain rates this week, which might weaken the yen. However, a hawkish outlook from policymakers could boost the currency.

USD/JPY key events today

• Federal Funds Rate
• FOMC Economic Projections
• FOMC Statement
• FOMC Press Conference

USD/JPY technical forecast: Bears retest the 30-SMA support

On the technical side, the USD/JPY price is bouncing higher after retesting the 30-SMA as support. The bullish bias is strong since the price has traded above the SMA since the trend reversed. At the same time, the RSI has stayed above 50 in bullish territory. 

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Bulls paused near the 154.00 key resistance level, and bears triggered a pullback to retest the 30-SMA support. If bulls remain in charge, the price will soon breach the 154.00 resistance to target the next hurdle at 156.00. Meanwhile, if the 154.00 holds firm, bears might breach the SMA to retest the 152.00 support level.

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