- The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The recent US CPI missed expectations across the board bringing the expectations for rate cuts forward.
- The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board. Last week though, the US Jobless Claims beat forecasts by a big margin, although volatility in the data is normal.
- The latest US PMIs came basically in line with expectations with a miss in the Manufacturing index and a beat in the Services measure.
- The US Consumer Confidence yesterday beat expectations although the details about the labour market continue to weaken.
- The Fed members have been leaning on the hawkish side, but more recently the tone changed to a more neutral stance.
- The market doesn’t expect the Fed to hike anymore.
- The BoJ kept its monetary policy basically unchanged at the last meeting but formally widened the YCC to 1% on the 10-year JGBs stating that it will be a reference cap.
- Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed and that they are not foreseeing sustainable price increases.
- The Japanese CPIlast week showed that inflation pressures are easing although they remain well above the BoJ’s 2% target.
- The latest Unemployment Rate remained unchanged near cycle lows.
- The Japanese Manufacturing PMI fell further into contraction but the Services PMI ticked higher remaining in expansion.
- The latest Japanese wage data beat expectations. As a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
- The market expects the BoJ to keep interest rates unchanged at the next meeting as well.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is now approaching a key trendline around the 146.50 level. This is where we can expect the buyers to step in with a defined risk below the trendline to position for another rally into the highs.
The rate cuts expectations and the consequent fall in Treasury yields have been weighing a lot on the US Dollar lately which boosted the JPY as the unwinding of some carry trades and the convergence of yield differentials favoured the Yen. As long as the market continues to price in rate cuts for the Fed and the US data continues to weaken, we can expect more JPY strength to come.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we got a nice selloff yesterday following the less hawkish comments from Fed’s Waller and the deteriorating labour market details in the US Consumer Confidence report. We are now at key levels so the sellers might want to see a pullback before positioning for more downside and target the break below the key trendline.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is pulling back at the moment. The sellers should lean on the downward trendline around the 148.00 handle to position for another selloff into the major trendline, while the buyers will want to see the price breaking higher to increase the bullish bets and target the trendline around the 149.50 level.
Tomorrow we will get the US PCE and US Jobless Claims data with the market likely focusing more on the latter given that we already saw the latest inflation data with the US CPI report just two weeks ago. On Friday, we conclude the week with the Japan Labour Market data and the US ISM Manufacturing PMI which missed expectations by a big margin the last time.