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.
- The US Consumer Confidence and University of Michigan Consumer Sentiment continue to fall.
- 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 latest 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 rolled over exactly from the cycle high at 151.94 as the US data showed more weakness, especially on the labour market side. The divergence with the MACD was already signalling that the momentum was weakening. In this case, the US data was the catalyst for the correction lower. We can expect the sellers to target the trendline around the 146.00 level now which is also where the buyers are likely to pile in to position for another rally targeting a break above the cycle high.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price bounced near the 147.00 handle and it looks like it’s heading for the 150.00 level again. That’s where we can expect the sellers to step in with more conviction as they will have the confluence with the trendline, the 61.8% Fibonacci retracement level and the previous swing low. The buyers, on the other hand, will want to see the price breaking above the trendline to increase the bullish bets into the cycle high.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price recently diverged with the MACD near the 147.00 handle and as the moving averages crossed over, the bias turned bullish with more buyers piling in to target a correction into the 150.00 handle. We now have a minor trendline which will be key for this correction. In fact, we can expect the buyers to lean on it in case the price pulls back to position for the continuation of the rally into the 150.00 resistance. The sellers, on the other hand, will want to see the price breaking lower to pile in and target the 146.00 level.
Upcoming Events
Today we will get the latest US Jobless Claims report which is probably going to be the most important release of the week. Tomorrow, the US will be on holiday for Thanksgiving Day and therefore the liquidity in the market will be thinner. On Friday, we conclude the week with the Japanese CPI data and the US PMIs. Weak US data should be bearish for the USDJPY pair as Treasury yields are likely to fall further. On the other hand, strong figures should support the current correction and lead to new highs.
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