US:
- The Fed left interest rates unchanged as expected at the last meeting.
- 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.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market remains fairly solid as seen last week with another strong beat in Jobless Claims and the NFP report.
- The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts in another sign that the US economy remains resilient.
- The market doesn’t expect the Fed to hike anymore.
Japan:
- The BoJ kept everything unchanged as expected at the last meeting.
- 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 Tokyo CPI, which is seen as a leading indicator for national CPI, continues to fall although it remains above the BoJ target.
- The Japanese wage data last week missed expectations which is unlikely to lead to a more hawkish BoJ since they want to see a higher wage growth.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDJPY pair last week crossed the key 150.00 handle after being smacked back down by the Japanese intervention. The price bounced soon after and started to consolidate around the 149.00 level as the market is now waiting for something to push in either direction. The US economic data is still supporting the upside for the pair and it’s likely to continue until we see weaker reports.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the intervention caused the price to break out of the bottom trendline of the rising wedge. The price then retested the broken trendline and continued lower towards the recent lows. 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. The breakout of the wedge raised the odds for a bigger correction into the 145.00 support.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a range between the 149.30 resistance and the 148.30 support. The sellers are likely to lean on the the resistance to position for a bigger correction into the 145.00 support. The buyers, on the other hand, will lean on the lower bound of the range to position for a rally into new highs and increase the bullish bets on a breakout.
Upcoming Events
This week the market is likely to focus on the CPI report as that’s what might change the expectations around the next FOMC rate decision. Tomorrow, we will see the US PPI data and later in the day the FOMC Meeting Minutes. On Thursday, it will be the time for the US CPI report, and at the same time we will also get the latest Jobless Claims figures. On Friday we conclude the week with the University of Michigan Consumer Sentiment report. Strong readings are likely to keep the USDJPY pair supported, while weaker figures should weigh on it.
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