USD/JPY stays steady as Fed holds rates, turns mildly hawkish

• Fed keeps fed funds rate steady, cites resilient labor market and balanced economic risks.
• US Treasury yields and Dollar Index gain modestly due to Fed's slightly hawkish inflation stance.
• Market participants await Fed Chair Powell's press conference for further directional guidance.

The USD/JPY remained unfazed during the North American session after the US Federal Reserve (Fed) maintained the fed funds rate at the 4.25%--4.50% range while shifting slightly hawkish after acknowledging there's no inflation improvement. At the time of writing, the pair trades at around 155.31, down 0.12%.

USD/JPY drops, even though Fed's remove inflation language

The Federal Reserve's monetary policy statement highlighted a resilient labor market while maintaining that risks to its dual mandate goals "are roughly in balance." Policymakers noted solid economic expansion and reiterated their commitment to monitoring risks while continuing balance sheet reduction at the existing pace. The decision was unanimous.  

Following the announcement, U.S. Treasury yields climbed, with the 10-year note rising four and a half basis points to 4.581%. The U.S. Dollar Index (DXY) gained 0.17%, reaching a session high of 108.10.

Meanwhile, USD/JPY traders will eye Fed Chair Jerome Powell's press conference at around 18:30 GMT.

USD/JPY Reaction to Fed's Decision

The USD/JPY ticked higher towards the 100-hour Simple Moving Average (SMA) at 155.44. If surpassed, it could pave the way to test the 200-hour SMA at 155.71. Further upside is seen, as 156.00 would emerge as the next resistance. 

Conversely, if USD/JPY drops inside the Ichimoku Cloud (Kumo) below 155.20, a test of 155.00 is on the cards. On further weakness, the pair could challenge the January 25 daily low of 154.09.