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USD/JPY Slides Sharply Ahead of Tomorrow's FOMC Minutes

The USD/JPY was not able to sustain last week's rally that came on the back of a strong NFP report. Although we have seen some modest labor market improvements, poor Q1 GDP revision to an annualized -2.9% was too too drastic to slip away in traders' memories. It is Q2 growth that is in question. Will the FOMC address the growth issue, and will it push back expectations of a rate hike to the latter half of 2015?

(usdjpy 1h chart)

As the USD/JPY dip further from the 102 handle, it reflects traders pricing in dovish FOMC meeting minutes.The 101.25 low is now in sight ahead of the FOMC event risk. If we do get a dovish tone but no mention of pushing back the rate hike, the USD/JPY can challenge the 2014 lows just above 100.75, but will have a hard time breaking lower.

If the minutes reveal real consideration of pushing back the rate hike, then USD/JPY is likely to challenge the 100.75 low in a hurry and would have the fuel to break lower.

If the minutes reveal optimism, it would be a surprise because we know the FOMC was also looking at that Q1 GDP revision. Still a relatively optimistic tone about Q2 growth meeting expectations, would be neutral to slightly hawkish, and can help USD/JPY find ground above 102 again. But the consolidation resistance area since May at 103 should limit the bullish outlook.