USD
- The Fed left interest rates unchanged as expected while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
- Fed Chair Powell stressed that they want to see more evidence of inflation falling back to target and that a rate cut in March is not their base case.
- The latest US GDP beat expectations by a big margin.
- The US PCE came mostly in line with expectations with the Core 3-month and 6-month annualised rates falling below the Fed’s 2% target.
- The US Job Openings surprised to the upside although the hiring and quit rates remain below pre-pandemic levels.
- The latest US PMIs beat expectations by a big margin for both the Manufacturing and Services measures.
- The US Retail Sales beat expectations across the board.
- The US Consumer Confidence report came in line with expectations but the labour market details improved considerably.
- The market now expects the first rate cut in May.
JPY
- The BoJ kept its monetary policy unchanged as expected 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 but he’s becoming more optimistic on achieving their 2% target.
- The Japanese CPI eased further across all measures which makes it even harder to expect a rate hike from the BoJ anytime soon.
- The latest Unemployment Rate ticked lower hovering around cycle lows.
- The Japanese PMIs improved for both the Manufacturing and Services measures although the former remains in contractionary territory.
- 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 a leading indicator for National CPI, fell much more than expected recently.
- The market expects the BoJ to hike rates in Q2.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY dropped into the key support zone around the 146.60 level where we can also find the red 21 moving average for confluence. This is where the buyers are likely to step in with a defined risk below the level to position for a rally into the cycle high. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a drop into the previous lows.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair looks to be trading inside a falling channel now with the price bouncing on the bottom trendline around the key support zone. The first target for the buyers should be the top trendline with a breakout likely leading to a rally into the cycle high next. The sellers, on the other hand, should lean on the top trendline to position for a drop back into the support zone targeting a breakout to the downside.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the price action inside the channel with the price now close to a level where we got multiple rejections from in the past few days. More aggressive traders might want to trade either a rejection from the level or a breakout to the upside, but ultimately the best levels, from a risk to reward perspective, are the trendlines of the channel.
Upcoming Events
Today we have the latest US Jobless Claims figures and the ISM Manufacturing PMI. Tomorrow, we conclude the week with the US NFP report. Strong data is likely to give the pair a boost while weak figures should send it lower.
See the video below
