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 CPI came in line with expectations with the Core measure continuing to show disinflation.
- The labour market displayed signs of softening although it remains fairly solid as seen also yesterday with another beat in Jobless Claims.
- The US Consumer Confidence this week missed expectations although the jobs details were positive.
- The market doesn’t expect the Fed to hike again at the moment.
Japan:
- The BoJ kept everything unchanged as expected.
- The Japanese CPI last week showed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
- The Unemployment Rate today 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 well above the BoJ target.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is getting close to the key 150.00 level which is the target of many market participants and it’s also considered the line in the sand for an intervention. The trend remains bullish as the price continues to print higher highs and higher lows with the moving averages being crossed to the upside and acting as dynamic support. The divergence in the economic data between US and Japan continues to favour the upside.
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 and reversals. This may be justified by the fear of an intervention that prevents the price to shoot up faster. The price action has also formed what looks like a rising wedge, which is a reversal pattern. If the price breaks below the bottom trendline, we might see the pair going back to the 145.00 level.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is printing lower lows and lower highs on this timeframe. The market might need to take a breather or something more on the fundamental side to push into the highs again. We might see the pair pulling back into the bottom trendline where the buyers are likely to step in again.
Upcoming Events
Today the only notable release will be the US PCE report. The data is unlikely to change anything for the market unless we get some big surprises.
See also the video below:
