Fundamental
Overview
The USD weakened across the
board on the Fed’s decision but eventually erased all the losses and increased
the gains as traders digested all the information and realised the projected
rate path was more hawkish than market’s pricing.
In fact, the dot plot
showed that the FOMC projected two more rate cuts for 2025 by a narrow
majority, with the rest of officials expecting just one more or even none.
Moreover, the Fed projected just one cut in 2026 compared to three that the
market was pricing before the decision.
Fed Chair Powell then
labelled the rate cut as a “risk management” move given the weakening in the
labour market data. But overall, he sounded pretty neutral even though he
understandably placed more emphasis on the labour market given the two
consecutive soft NFP reports.
The day after the FOMC
decision, we got a solid US jobless claims report, and the greenback increased
the gains further. Looking forward, it’s going to be all about the data. Strong
data will likely trigger a hawkish repricing in interest rates expectations and
support the greenback. On the other hand, weak data will likely continue to
weigh on it.
On the JPY side, the BoJ
kept interest rates unchanged as expected last week but the market got
surprised by two members voting for a rate hike. The yen initially rallied but
once Governor Ueda started speaking, the gains began to fade and eventually got
erased completely as Ueda downplayed the dissenting votes.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY eventually rallied all the way back to the key resistance
zone around the 148.50 level. That’s where we can expect the sellers to step in
with a defined risk above the resistance to position for a drop back into the
major trendline around the 146.00 handle. The
buyers, on the other hand, will want to see the price breaking higher to
increase the bullish bets into the 151.00 handle next.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see more clearly the rangebound price action that’s been going on since August.
We got the spike lower on the Fed’s decision but eventually the price bounced
on the trendline and rallied all the way back to the resistance. There’s not
much else we can glean from this timeframe, so we need to zoom in to see some
more details.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a minor support zone between the 147.20-147.50 levels. If the
price falls into that zone, we can expect the buyers to step in with a defined
risk below the support to position for a rally into the 151.00 handle. The
sellers, on the other hand, will want to see the price breaking lower to pile
in for a drop into the major trendline. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US Flash PMIs, as well
as Fed Chair Powell speaking. Tomorrow, we have the Japanese Flash PMIs. On
Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude
the week with the Tokyo CPI and the US PCE report. Keep also an eye on Fed
speakers this week.
Watch the video below
This article was written by Giuseppe Dellamotta at investinglive.com.