USD/JPY drops to weekly lows, around 105.65-60 region on Powell’s dovish comments

• USD/JPY witnessed some selling in reaction to Powell’s dovish comments.
• The Fed will target a 2% average inflation in the new monetary policy strategy.
• The USD weakened across the board, dragging the pair to fresh weekly lows.

The USD/JPY pair edged lower and dropped to fresh weekly lows, around the 105.65 area following the Fed Chair Jerome Powell's remarks at the Jackson Hole Symposium.

After a rather muted reaction to Thursday's mixed US macro data, the pair witnessed some selling during the early North American session in reaction to Powell's dovish sounding comments. In his prepared remarks, Powell said that the Fed will target average inflation in the new monetary policy strategy.

Committee now seeks to achieve inflation that averages 2% over time. Powell further added that the Fed will seek to ensure that employment does not fall short of its maximum level. The committee judged that the downward risks to employment and inflation have increased, which, in turn, exerted some pressure on the US dollar.

It will now be interesting to see if the USD/JPY pair is able to attract any buying interest at lower levels or extends the downfall further towards challenging the key 105.00 psychological mark.

Technical levels to watch