USD
- The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The recent US CPI missed expectations across the board bringing the expectations for rate cuts forward.
- The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board, but yesterday the US Jobless Claims beat forecasts giving the USD a short-term boost.
- The latest US ISM Manufacturing PMI missed expectations by a big margin, followed by a disappointing ISM Services PMI, although the latter remained in expansion.
- The recent US Retail Sales beat expectations, while the US PPI missed forecasts by a big margin.
- The recent Fedspeak has been leaning on the hawkish side, but last week’s inflation report pretty much confirmed that the Fed might be done for the cycle.
- The market doesn’t expect the Fed to hike anymore.
JPY
- The BoJ kept its monetary policy basically unchanged at the last meeting but formally widened the YCC to 1% on the 10-year JGBs stating that it will be a reference cap.
- Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed and that they are not foreseeing sustainable price increases.
- The Japanese CPIshowed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
- The Unemployment Rate remained unchanged near cycle lows.
- The Japanese Manufacturing PMI matched the prior reading remaining in contraction with the Services PMI falling but holding on in expansion.
- The latest Japanese wage data beat expectations. As a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
- The market expects the BoJ to keep interest rates unchanged at the next meeting as well.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY sold off from the cycle high at 151.92 following weaker than expected US data last week that pushed Treasury yields and the US Dollar lower. This week, the pair bounced back and it’s now near the key 150.00 handle. The bias is now more skewed to the downside as the moving averages have finally crossed to the downside and the buyers may wait for the price to come into the trendline around the 146.00 handle where they will have a much better risk to reward setup.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is now near a key resistance zone where we can find the confluence with the 150.00 handle, the daily moving averages, the downward trendline and the 61.8% Fibonacci retracement level. The sellers are likely to pile in around these levels with a defined risk above the trendline to position for a drop into the major trendline. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and position for a rally into the highs.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the bullish trend on this timeframe is beginning to wane as the price broke out of the minor upward trendline and started to consolidate just beneath the key resistance. If the price breaks below the most recent swing low around the 148.90 level, the chances for a bearish move will increase and we can expect the sellers to pile in to target the 146.00 handle.
Upcoming Events
Today, we will see the latest US PMIs where a miss is likely to push the USDJPY pair lower, while a beat should give it another push to the upside.
