USD
- The Fed left interest rates unchanged as expected at the last meeting 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.
- The latest US CPI slightly beat expectations but analysts expect the Core PCE to print at 0.2% again following the CPI data.
- The labour market continues to soften although Initial Claims keep on hovering around cycle lows while Continuing Claims got stuck at a higher level.
- The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
- The hawkish Fed members have been leaning on a more neutral side lately.
- The market expects the Fed to start cutting rates in Q1 2024.
JPY
- The BoJ kept its monetary policy unchanged at the last meeting 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 missed expectations by a big margin and as a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
- The Tokyo CPI, which is seen as leading indicator for National CPI, eased further but the Core-Core measure remains stuck at cycle highs.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY yesterday spiked into the key resistance zone around the 146.60 level where we had also the 50% Fibonacci retracement level for confluence. The pair reversed soon after as the sellers stepped in with a defined risk above the resistance to position for a drop into new lows.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is rejecting a key support zone around the 145.00 handle where we can find the confluence with the trendline, the red 21 moving average and the 50% Fibonacci retracement level. This is where the buyers are likely to pile in with a defined risk below the trendline to position for a rally into the resistance and targeting a break above it.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action with the price reacting to the trendline. If the price were to break below the trendline, the bullish setup would be invalidated, and the sellers will increase the bearish bets with the first target coming at the swing low around the 143.50 level.
Upcoming Events
Today the only notable event on the agenda will be the US PPI data where an upside surprise might give the US Dollar a boost in the short-term.
See the video below
