US

  • The Fed left interest rates unchanged as expected with basically no change to the statement.
  • Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
  • The US Core PCE last week came in line with expectations.
  • The labour market remains pretty resilient but we are starting to see some weakness as Jobless Claims missed expectations once again this week with Continuing Claims now rising at a fast pace.
  • The US Consumer Confidence fell for the third consecutive month although the data beat expectations.
  • The US ISM Manufacturing PMI this week missed expectations by a big margin.
  • The market doesn’t expect the Fed to hike anymore.

Japan

  • The BoJ kept its monetary policy basically unchanged but formally widened the YCC to 1% on the 10-year JGBs stating that it will be a reference cap.
  • Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed and that they are not foreseeing sustainable price increases.
  • The recent Japanese CPIshowed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
  • The Unemployment Rate remained unchanged near cycle lows.
  • The Japanese Manufacturing PMI matched the prior reading remaining in contraction with the Services PMI falling but holding on in expansion.
  • The latest Japanese wage data missed expectations again which is unlikely to lead to a more hawkish BoJ in the near future.
  • The Tokyo CPI, which is seen as a leading indicator for National CPI, beat expectations last week.
  • The market expects the BoJ to keep interest rates unchanged at the next meeting as well.

USDJPY Technical Analysis – Daily Timeframe

USDJPY Technical Analysis
USDJPY Daily

On the daily chart, we can see that the USDJPY pair shoot higher following the disappointing BoJ policy decision and came close to touch the cycle high around the 152.00 handle. The price since then started to roll over as Treasury yields continued to fall following weaker US data. We can also notice that the price continues to diverge with the MACD, which is a sign of weakening momentum often followed by pullbacks or reversals. If the price falls below the 150.00 level, we can expect the sellers to increase the bearish bets and target the major trendline around the 146.00 level.

USDJPY Technical Analysis – 4 hour Timeframe

USDJPY Technical Analysis
USDJPY 4 hour

On the 4 hour chart, we can see that the price yesterday bounced on the 150.00 level and pulled back into the support turned resistance around the 150.60 level. The price is now rolling off again as it keeps a bearish bias, but all eyes will be on the NFP report later today.

USDJPY Technical Analysis – 1 hour Timeframe

USDJPY Technical Analysis
USDJPY 1 hour

On the 1 hour chart, we can see that we now have two key levels to watch out for: the resistance zone around the 150.60 level and the support at the 150.00 level. A break above the resistance is likely to open the door for a new high with the buyers increasing the bullish bets. On the other hand, a break below the support should see more sellers piling in to extend the drop into the trendline first, and upon a breakdown, increase the bearish momentum into the 146.00 level.

Upcoming Events

Today, we conclude the week with the US NFP report and the ISM Services PMI. If the data misses expectations, we should see more downside for the USD as Treasury yields will likely fall further.

See the video below