US:
- The Fed left interest rates unchanged as
expected. - The macroeconomic projections were revised higher
as the economy showed much stronger resilience than expected and the Dot Plot
showed that the majority of members still expects another rate hike by the end
of the year with less rate cuts in 2024. - Fed Chair Powell
reaffirmed their data dependency but added that they will proceed carefully as
they are trying to find the optimal level of rates. Powell also added that the
soft landing is not the base case at the moment, although they are aiming for
it. - The latest US Core PCE
came
in line with expectations with disinflation continuing steady. - The labour market
displayed signs of softening although it remains fairly solid as seen also last
week with a strong beat in Jobless Claims. - The ISM Manufacturing PMI beat
expectations yesterday in another sign that the US economy remains resilient. - The market doesn’t expect the Fed to hike again at
the moment.
Japan:
- The BoJ kept everything unchanged as expected.
- 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 matched
the previous reading. - 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 and clarified that the recent
comment on “quiet exit” from monetary easing was misinterpreted. - The recent Japanese wage data showed a slowing in wage growth,
and this is something the BoJ focuses on particularly. - The Tokyo CPI, which is seen as a leading
indicator for national CPI, continues to fall although it remains above the BoJ
target.
USDJPY Technical Analysis –
Daily Timeframe
On the daily chart, we can see
that the USDJPY pair is getting closer to the key 150.00 level which is seen as
the line in the sand for an intervention by many market participants. The
resilience in the US economic data continues to support further upside for the
pair and the inaction from the BoJ on the policy front certainly doesn’t help
the JPY.
USDJPY Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see that we have a
massive divergence with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the fear of an intervention is what is probably
limiting a stronger rally in the pair. The sellers are likely to step in around
these levels to target another drop into the black trendline. The
buyers, on the other hand, are likely to pile in around the trendline where
they will have a better risk to reward setup and won’t be too close to the
“intervention” level.
USDJPY Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that we
have a minor support zone
around the 149.55 level where we might find some aggressive buyers entering the
market with a defined risk below the support to target a breakout. The sellers,
on the other hand, will want to see the price breaking lower to position for a
drop into the trendline and target a break below it.
Upcoming Events
This week we have many key economic releases that will
culminate in the US NFP report on Friday. Today, we will have the US Job
Openings data which led to a strong selloff the last time as the big miss made
Treasury yields to fall due to less labour market tightness and less hawkish
Fed expectations. Tomorrow, it will be the time for the ADP report and the ISM
Services PMI. On Thursday, we will see the Jobless Claims data, which continues
to show a solid labour market. Finally on Friday, it will be the time for the
NFP report which is the only one the Fed will see before its next rate decision
and the Japanese wage data. Strong US data should continue to support the
upside in USDJPY so the bears will want to see weak figures.
See also the video below:
This article was written by FL Contributors at www.forexlive.com. Source