USD

  • The Fed left interest rates unchanged as expected at the last meeting and dropped the tightening bias in the statement.
  • The US PCE came in line with expectations.
  • The US Jobless Claims missed expectations although the data is still in the recent ranges.
  • The latest US PMIs increased further from the prior month with the Manufacturing PMI beating expectations and the Services PMI missing.
  • The US Consumer Confidence missed expectations across the board.
  • The market expects the first rate cut in June.

JPY

  • The BoJ kept its monetary policy unchanged as expected at the last meeting with interest rates at -0.10% and the 10 year JGB yield target at 0% with 1% as a reference cap.
  • The Japanese CPI beat expectations although all measures eased further from the prior readings.
  • The latest Unemployment Rate remained unchanged hovering around cycle lows.
  • The Japanese PMIs improved for both the Manufacturing and Services measures although the former remains in contractionary territory.
  • The Japanese wage data missed expectations again recently although there was a pick up from the prior reading.
  • The market expects the BoJ to hike rates in Q2.

USDJPY Technical Analysis – Daily Timeframe

USDJPY Technical Analysis
USDJPY Daily

On the daily chart, we can see that USDJPY yesterday sold off following some hawkish comments from BoJ’s Takata. The buyers stepped in around the red 21 moving average as the big picture remained unchanged. In fact, even if the BoJ hikes, it’s unlikely to embark on a real tightening cycle given the falling inflation rate. The target for the buyers remains the cycle high at 151.90.

USDJPY Technical Analysis – 4 hour Timeframe

USDJPY Technical Analysis
USDJPY 4 hour

On the 4 hour chart, we can see more closely the yesterday’s selloff with the latest leg lower caused by the US data where the PCE came in line with expectations and the US Jobless Claims missed forecasts. The buyers will now need the price to break above the resistance around the 150.89 level to increase the bullish bets into the cycle high. The sellers, on the other hand, will likely step in around the resistance with a defined risk above it to position for a drop into new lows.

USDJPY Technical Analysis – 1 hour Timeframe

USDJPY Technical Analysis
USDJPY 1 hour

On the 1 hour chart, we can see that the latest leg lower diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. The buyers took it as an opportunity to fade the selloff and position for a rally back into the highs. We now have a support zone around the 150.10 level where we can also find the red 21 moving average for confluence. If we were to get a pullback, that’s where we can expect the buyers to step in again for another rally into the highs. The sellers, on the other hand, will want to see the price breaking lower to pile in and target new lows.

Upcoming Events

Today the only notable event will be the release of the US ISM Manufacturing PMI.