USD
- The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement. The Dot Plot still showed three rate cuts for 2024 and the economic projections were upgraded with growth and inflation higher and the unemployment rate lower.
- Fed Chair Powell maintained a neutral stance as he said that it was premature to react to the recent inflation data given possible bumps on the way to their 2% target.
- The US CPI and the US PPI beat expectations for the second consecutive month.
- The US NFP beat expectations across the board although the average hourly earnings came in line with forecasts.
- The US ISM Manufacturing PMI beat expectations by a big margin with the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to the lowest level in 4 years.
- There’s now basically a 50/50 chance of a rate cut in June.
JPY
- The BoJ finally exited the negative interest rates policy as expected at the last meeting raising interest rates by 10 bps bringing the rate to a target between 0.00-0.10%. Moreover, the central bank scrapped the yield curve control and the ETF purchases, while maintaining QE in place.
- The latest Unemployment Rate missed expectations although it continues to hover around cycle lows.
- The Japanese PMIs improved further for both the Manufacturing and Services measures although the former remains in contractionary territory.
- The latest Japanese wage data came in line with expectations.
- The Tokyo CPI, which is seen as a leading indicator for National CPI, came in line with expectations.
- The market expects another rate hike from the BoJ this year although the timing remains uncertain.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY continues to consolidate just beneath a crucial resistance level at 151.92. In fact, we can notice that the pair has formed a big ascending triangle and a break above the resistance could trigger a strong move to the upside. We can expect the sellers to step in around these levels with a defined risk above the resistance to position for a drop all the way back to the bottom trendline of the triangle. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets and target new highs.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been ranging between the 151.00 support and the 151.92 resistance as the risk of an intervention put a lid on further gains. The price recently rallied back into the resistance and it’s now pressing on it threatening a breakout. Even if we get a breakout, it would be better to wait for the US CPI report tomorrow as a miss will likely trigger a selloff leaving behind a fakeout.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the rally from the 151.00 support back into the 151.92 resistance. We can see that we have another strong zone around the 151.50 level where the price reacted to several times in the past weeks. If the price falls back into that zone, the buyers might want to step in with a defined risk below it to position for a breakout with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 151.00 support targeting a breakout to the downside.
Upcoming Events
Tomorrow we get the US CPI report and the FOMC Minutes. On Thursday, we will have the US PPI and the latest US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment Survey.
