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% M/M again following the CPI data.
- The labour market continues to soften but remains resilient with US Jobless Claims beating expectations week after week.
- The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
- The US Retail Sales beat expectations across the board.
- The Fed members recently have been pushing back on the aggressive rate cuts expectations.
- The market expectation for a rate cut in March fell to roughly 50%.
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 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 Japanese CPI eased further across all measures which makes it even harder to expect a rate hike from the BoJ anytime soon.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY broke through the key resistance zone around the 146.60 level where we also had the 50% Fibonacci retracement level for confluence. The buyers piled in aggressively supported by hawkish Fed’s Waller comments and strong US data. The natural target should now be the cycle high around the 152.00 handle unless we see a complete turnaround in the economic data in the next few weeks.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers will have a much better risk to reward setup around the trendline where we can also find the 50% Fibonacci retracement level and the previous resistance now turned support for confluence. The sellers, on the other hand, will want to see the price breaking below the trendline to invalidate the bullish setup and position for a drop back into the lows.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback into the recent swing low around the 147.66 level where the buyers are likely to step in with a defined risk below the level to position for another rally. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the major trendline and target a break below it.
Upcoming Events
Today, the only notable event will be the University of Michigan Consumer Sentiment survey. The price is already a bit overstretched, but a surprisingly strong or weak release could trigger sustained reactions.
See the video below
