US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The US CPI last week beat expectations on the headline figures, but the core measures came in line with forecasts and the market’s pricing barely changed.
- The labour market remains fairly solid as seen once again last week with the beat in Jobless Claims, although continuing claims surprisingly missed.
- The US PMIs recently showed that the US economy remains pretty resilient.
- The University of Michigan Consumer Sentiment report last Friday missed across the board with the inflation expectations figures spiking back up.
- The US Retail Sales yesterday beat expectations by a big margin with positive revisions to the prior figures.
- The Fed members continue to cite elevated long-term yields as a reason to proceed carefully and will likely pause in November as well.
- The market doesn’t expect the Fed to hike anymore.
Japan:
- The BoJ kept everything unchanged as expected at the last meeting.
- The Japanese CPI showed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
- The Unemployment Rate missed expectations although it remains near cycle lows.
- The Japanese Manufacturing PMI fell further into contraction but the Services PMI remains in expansion.
- BoJ governor Ueda repeated that they will not hesitate to take additional easing measures if needed.
- The Tokyo CPI, which is seen as a leading indicator for national CPI, continues to fall although it remains above the BoJ target.
- The latest Japanese wage data missed expectations again which is unlikely to lead to a more hawkish BoJ in the near future.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDJPY pair is tentatively approaching again the key 150.00 level as the fears around another intervention linger. The red 21 moving average continues to act as a dynamic support for the pair, but we can also notice that the whole move from the 145.00 level has been diverging with the MACD, which is generally a sign of weakening momentum. It looks like if we get one notable negative news, the pair could drop fast back into the 145.00 level.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been printing higher lows into the 150.00 which now formed what looks like an ascending triangle. Generally, when the price breaks on either side of the pattern we can see a strong sustained move in the direction of the breakout, so it will be something to watch out for.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price recently broke above the resistance around the 149.35 level which turned into support on a retest. The spike lower yesterday was caused by an overreaction, probably from some algo, to an old news about the BoJ raising the inflation forecasts at the next meeting.
The levels to watch now will be the 149.35 support and the 150.00 resistance. If we get another drop into the support level, the buyers are likely to step in with a defined risk below the level to position for a rally into the resistance, ultimately targeting a breakout. The sellers, on the other hand, will want to see the price breaking through the support level to pile in and target a selloff into the 145.00 level.
Upcoming Events
Tomorrow we will get the latest US Jobless Claims report and the market will want to see if the miss in Continuing Claims last week was just a blip or the start of a trend. Later in the day, we will also hear from Fed Chair Powell where the market will be focused on any hint about the near-term policy outlook. On Friday we get the latest Japanese inflation figures. Strong US data or a hawkish Powell is likely to support the upside in the USDJPY pair, while weaker US figures or a surprisingly strong Japanese CPI might trigger a selloff.
See the video below
