USD
- The Fed left interest rates unchanged as expected with a shift in the statement that indicated the end of the tightening cycle.
- The Summary of Economic Projections showed a downward revision to Growth and Core PCE in 2024 while the Unemployment Rate was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts in 2024 compared to just two in the last projection.
- Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long, which implies a rate cut coming soon.
- The US CPI last week came in line with expectations with the disinflationary progress continuing steady. This was also confirmed by the US PPI the day after where the data missed estimates.
- The labour market has been showing signs of weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming in strongly.
- The US Retail Sales last week beat expectations across the board as consumer spending continues to hold.
- The latest ISM Manufacturing PMI missed expectations falling further into contraction, while the ISM Services PMI beat forecasts holding on in expansion.
- The market expects the Fed to start cutting rates in Q1 2024.
JPY
- The BoJ kept its monetary policy unchanged with interest rates at -0.10% and the 10 year JGB yield target at 0% with 1% as 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 unless wage growth picks up.
- The latest Japanese CPIshowed that inflationary 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 last week tumbled to new lows following the surprisingly dovish FOMC decision but erased most of the losses as the US data came in strongly and the BoJ today kept its policy unchanged. The sellers should lean on the key 145.00 handle where they will also find the red 21 moving average for confluence. The bias remains bearish as the price has been printing lower lows and lower highs with the moving averages being crossed to the downside.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have some more confluence around the 145.00 handle as we can find the trendline and the 61.8% Fibonacci retracement level of the latest leg lower. This should give the sellers some more conviction to lean on the 145.00 resistance with a defined risk above the trendline to position for a drop into the 138.00 handle. The buyers, on the other hand, will want to see the price breaking above the trendline to invalidate the bearish setup and start targeting new highs.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the pair has been a bit choppy recently as this pullback looks more complex with an erratic price action. Nevertheless, the level to watch is the 145.00 handle as that’s where the battle between buyers and sellers should get interesting and what happens around that resistance should decide where the pair will go next. A break below the counter-trendline should see the sellers increase their bearish bets into the 138.00 handle.
Upcoming Events
This week is a bit empty on the data front as we head into the Christmas holidays. On Wednesday, we have the US Consumer Confidence report. On Thursday, we get the latest US Jobless Claims data, while on Friday we conclude the week with the Japanese CPI and the US PCE reports.
See the video below
