The price of the USD/JPY pair goes down to around 147.00 during the European session on Wednesday.

Even though the US economy is slowing down, there is talk that the Fed might become less aggressive. It has put dollar bulls on the defensive. The value of the Japanese yen will stop the currency from falling. Several factors are pushing the USD/JPY exchange rate down, but a significant change is hard to come by.

Before the FOMC policy announcement later in the US session, traders may want to avoid making risky bets. The Fed will likely raise rates by 75 bps for the fourth time in as many meetings. People will pay attention to the policy statement and to what Fed Chair Jerome Powell says after the meeting.

Investors will look for signs of future rate hikes to figure out where the USD/JPY pair is going in the short term. Prices on the market show a 50% chance of a 50-bps Fed rate hike in December. The Bank of Japan doesn’t plan to raise interest rates, so the yield on 10-year bonds will stay at 0%.

It makes the difference between the US and Japanese interest rates bigger, which should limit USD/JPY losses. So far, spot prices have held up the 200-period 4-hour SMA. Before setting up for a drop from the highest level since August 1990, it is wise to wait for solid follow-through selling.

Conclusion

Traders may look at the US ADP jobs report before the important central bank event. The data might not help the pair USD/JPY.