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 US Core PCE last week came in line with forecasts with the disinflationary progress continuing steady.
- 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 ISM Manufacturing PMI last week missed expectations falling further into contraction.
- The recent US Consumer Confidence report beat expectations although the details about the labour market continued to weaken.
- The hawkish Fed members recently shifted their stance to a more neutral position.
- The market expects the Fed to start cutting rates as soon as Q1 2024.
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 inflation pressures are easing although they remain well above the BoJ’s 2% target.
- The latest Unemployment Rate remained unchanged near cycle lows.
- The Japanese Manufacturing PMI fell further into contraction but the Services PMI ticked higher remaining in expansion.
- The latest Japanese wage data beat expectations and as a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
- The market expects the BoJ to hike rates in Q2 2024.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY dropped into the key trendline around the 146.50 level after testing probably for the last time in this cycle the high at 151.92. The bias remains bearish as the price has been printing lower lows and lower highs with the moving averages now being crossed to the downside. The sellers will need the price to break below the key 145.00 handle though to confirm the reversal and start targeting the 127.00 handle with more conviction.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a divergence with the MACD right at the key trendline. This is generally a sign of weakening momentum often followed by pullbacks or reversals. This might be a bad omen for the sellers in the short term as it might be a sign that the pair could correct higher, if not completely reverse the trend. The buyers are likely to pile in around this trendline to target a breakout to the upside of the falling wedge and increase the bullish bets into the 150.00 handle.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that at the moment, the buyers are leaning on all the support levels to position for a rally into new highs. The first target should be the resistance zone around the 147.50 level where we can find the confluence with the downward trendline and the 61.8% Fibonacci retracement level. That’s where the sellers will likely pile in with a defined risk above the trendline to position for a drop into the lows and target a breakout to the downside.
Upcoming Events
This week we will see lots of US labour market data culminating with the NFP release on Friday. Today, we have the ISM Services PMI and the US Job Openings reports. Tomorrow, we will get the US ADP data. On Thursday, it will be the time for the US Jobless Claims figures, while on Friday we conclude the week with the Japanese Wage data and the NFP report.
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