The Fed hiked interest rates by 25 bps as expected leaving the policy statement unchanged. Tha market was more focused on hints and clues on the next Fed moves but it got disappointed as Fed Chair Powell has just reaffirmed their data dependency and kept all options on the table. Yesterday, the USD strengthened across the board as the US Jobless Claims beat expectations by a big margin again giving the markets hawkish vibes.
On the other hand, we got two days of high volatility in the JPY as yesterday we got a leak from Nikkei saying that the BoJ will discuss tweaking the YCC policy at the upcoming meeting, which was the opposite of what the Reuters leak said last week. Today, the BoJ kept everything unchanged as expected but indeed implicitly tweaked the YCC policy keeping the target band unchanged but giving more flexibility with a hard cap at 1.00%. So, they basically widened the YCC band without stating it explicitly.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that the rally in USDJPY from the 137.95 support got rejected around the 142.00 handle where we had the confluence of the 61.8% Fibonacci retracement level and the red 21 moving average. The price is now contained in this wider range, but the bias is now more bearish.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had the sellers leaning on the top trendline to position for more downside, and then the whipsaws following the Nikkei leak and the BoJ policy decision. The sellers will now try to find a resistance where they can lean onto to position for a breakout lower. More conservative sellers are likely to wait for the price to break below the 137.95 support before piling in and target the 134.00 swing low.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a pretty good resistance zone around the 140.00 handle where there’s also the red 21 moving average for confluence. This is where the sellers are likely to pile in with a defined risk above the level and target a break below the support. The buyers, on the other hand, will keep on piling in at every upside breakout and are likely to switch the bias to bullish in case the price rises above the 141.00 handle.
Upcoming Events
Today the market will be watching the US PCE and the Employment Cost Index reports. Given that the PCE is less timely than the CPI and the market is already looking forward to the next month’s inflation report, we shouldn’t see much movement from the PCE unless there’s a big surprise. In fact, the Employment Cost Index is likely to be more important given the Fed’s focus on wage inflation and the tight labour market. A higher than expected reading should give the US Dollar a short-term boost, while a lower than expected figure should send the USDJPY lower.
See also the video below:
