USD
- The Fed left interest rates unchanged as expected 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 US CPI report yesterday missed expectations across the board sparking a strong dovish repricing and USD weakness.
- The labour market is starting to show some weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board.
- The US Consumer Confidence and University of Michigan Consumer Sentiment continue to fall.
- The recent 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 Fedspeak has been leaning on the hawkish side, but the US CPI data yesterday was basically a declaration that the Fed is definitely done.
- The market doesn’t expect the Fed to hike anymore.
JPY
- The BoJ kept its monetary policy basically unchanged 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 recent 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 managed to retest the 2022 high at 151.94 before retreating and eventually plummeting following the miss in the US CPI report. The divergence with the MACD has been going on for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we have only got pullbacks into the red 21 moving average, but given the changing outlook around US rates, this might even be the top.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that yesterday’s selloff almost reached the 150.00 handle before pulling back a bit. The price is now around a key resistance zone where we can find the confluence with the blue 8 moving average and the 38.2% Fibonacci retracement level. This is where the sellers are likely to step in with a defined risk above the resistance to position for another drop into the trendline.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we had another divergence with the MACD right when the price was trading into the 2022 high. The price then broke below the trendline and plunged on the US CPI release. Right now, we can see that we have also the red 21 moving average for further confluence at the resistance zone. The buyers will want to see the price breaking above the resistance to invalidate the bearish setup and position for a rally back to the highs.
Upcoming Events
Today, we have the US Retail Sales and PPI data with the market likely giving more importance to the Retail Sales data. Tomorrow, we will see the latest US Jobless Claims figures where the market will want to see how fast the labour market is softening. Weak data is likely to keep the USD under pressure, while strong figures should give the greenback a bit of relief.
