Last week, the NFP missed expectations for a second time in a row and the previous numbers were all revised lower. This was seen as a disappointment as the labour market seems to be a touch weaker than previously expected. Nevertheless, the unemployment rate fell once again and lessened the disappointment from the miss in the payrolls number. The worse part for the Fed is that the average hourly earnings beat expectations, and such high wage growth is not consistent with a sustainable return to the 2% target. It’s worth reminding though, that the Fed will see another NFP report before the September meeting, so this NFP doesn’t change much, but the data leading into the meeting can still weigh on sentiment.
On the other hand, the BoJ kept everything unchanged as expected but 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. This has created lots of volatility in the JPY, but eventually led to a fast depreciation. The BoJ last week intervened twice to smooth the rise in yields ultimately weighing on the JPY.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY printed a double bottom around the 138.00 handle, and it now looks like it’s set to reach a new high. The moving averages have again crossed to the upside switching the bias from bearish to bullish and the price broke and retested a strong resistance now turned support. The first target for the buyers will be the 145.00 handle.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the rally from the 138.00 handle broke above the black counter-trendline and increased the bullish momentum eventually extending to the 144.00 handle. The price has recently pulled back to the 142.00 support where there was also the confluence with the 38.2% Fibonacci retracement level and started to rise again.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a support zone around the 142.80 level where we have find the 38.2% Fibonacci retracement level and the red 21 moving average. This is where the buyers are likely to pile in with a defined risk below the support to target the 145.00 handle. The sellers, on the other hand, will want to see the price breaking lower to target the 142.00 handle or lower lows.
Upcoming Events
This week the main event will be the US CPI report on Thursday. The market is likely to focus more on the Core readings as this is what the Fed is more interested in. Higher than expected data should give the US Dollar a boost as the market’s expectations will be skewed more on the hawkish side. On the other hand, lower than expected readings should weigh on the USD as it would support the soft-landing narrative and no more rate hikes. At the same time of the US CPI data, we will also see the latest US Jobless Claims report, which is less likely to move the market since it’s released at the same time of the CPI, but big surprises should have an effect, nonetheless. Finally, we conclude the week with the University of Michigan Consumer Sentiment report on Friday where the market is likely to focus more on the inflation expectations figures.
