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 as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market displayed signs of softening although it remains fairly solid as seen also with another strong beat in Jobless Claims yesterday and with the beat in Job Openings.
- 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 miss in the ADP report led to some USD weakness which might continue if the NFP data misses forecasts.
- The market doesn’t expect the Fed to hike again at the moment.
Japan:
- The BoJ kept everything unchanged as expected.
- 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 today 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 eventually crossed the key 150.00 level before getting smacked back down by an intervention. The Japanese officials didn’t comment on the intervention but it’s hard to deny after such a big and quick move. Nonetheless, the price bounced back soon after and started to consolidate as market participants might now be afraid to push above the 150.00 level without a clear and strong catalyst.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the intervention spike from the 150.00 level. The price is now below the trendline and the massive divergence with the MACD might lead to a bigger correction into the 145.00 level, especially if the US data starts to miss expectations. The miss in the Japanese wage data today might lead to a short-term rally into the broken trendline, but the NFP report is what is likely to lead to a more sustained move.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been diverging with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see a rally into the 149.30 level where we have the confluence with the broken trendline and the previous swing high level. This is where the sellers are likely to pile in with a defined risk above the level to target the 145.00 level. The buyers, on the other hand, will want to see the price breaking higher to try again a break above the 150.00 level.
Upcoming Events
Today it’s all about the NFP report which is the only one the Fed will see before its next rate decision. The US jobs data going into the NFP was strong, so the expectations might be skewed to the upside.
See the video below: