With two fed members (Fisher and Plosser) hawkish dissenters, there is growing speculation the fed committee is skewed to the hawkish side. This leaves fewer members, including Yellen herself, on the dovish side and is likely to be among the lower ‘dots'.
After the results of the dot plot analysis, I feel there will be plenty of hawkish commentary this week. This would be bullish for the greenback and drive USD/JPY even higher. USD/JPY printed a high of ¥109.46 but has since retreated and is trading in the ¥108.70 region.
To be fair, the pair seemed significantly overbought and a pullback was always on the cards. At the moment, markets are focusing on comments from finance minister Amari, saying a second increase in taxes was necessary. He also said the government and BoJ have to work closely together to achieve their goals, which we already know.
Essentially, if the recovery stalls, we can expect the BoJ to step in and look at taking some action. USD/JPY traded as low as ¥101.50 in August and topped out at ¥109.46 last week. The 23.60% retracement of the move comes in at ¥107.58 and that’s where the key level lies. Given this move looks quite stretched, it makes it difficult to establish a buy level. Initial near-term support is likely to be in the ¥108.00 region.