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 NFP report beat expectations across the board by a big margin.
- The ISM Manufacturing PMI surprised to the upside with the new orders index, which is considered a leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat expectations across the board with the employment sub-index erasing the prior drop and prices paid jumping above 60.
- 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.
- 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 Japanese wage data missed expectations again recently although there was a pick up from the prior reading.
- 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 recently broke the resistance at 148.80 following some dovish comments from BoJ’s Deputy Governor Uchida. The pair got stuck in a consolidation ever since as the market probably wanted to wait for the US CPI report today to be released before deciding where to go next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the buyers stepped in around the resistance turned support where we had also the confluence with the trendline and the red 21 moving average to position for the rally into the cycle high around the 151.90 level. 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 146.60 support.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price action might have formed an ascending triangle. The price can break on either side of the pattern but what follows next is generally a strong and sustained move in the direction of the breakout. If the price were to break to the downside, the sellers will also need to break below the 148.80 support before confirming a bigger correction to the downside. For the buyers, on the other hand, the 148.80 support will be the last line of defence.
Upcoming Events
Today we have the main event of the week, that is, the US CPI report. On Thursday we will see latest US Jobless Claims figures and the US Retail Sales. Finally, on Friday, we conclude the week with the US PPI data and the University of Michigan Consumer Sentiment survey.
See the video below
