US:
- The Fed left interest rates unchanged as expected.
- 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 CPI came in line with expectations, so the market’s pricing remained roughly the same.
- The labour market displayed signs of softening although it remains fairly solid as seen also yesterday with the strong beat in Jobless Claims.
- The market doesn’t expect the Fed to hike again at the moment.
Japan:
- The BoJ kept everything unchanged as expected.
- The Japanese CPI last week showed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
- The Unemployment Rate surprisingly increased last month, although it remains near cycle lows.
- 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 recent Japanese wage data showed a slowing in wage growth, and this is something the BoJ focuses on particularly.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDJPY pair is now getting close to the 150.00 handle, which is what many market participants have been targeting, and it’s also near the upper bound of the rising channel. We might finally see a decent correction from those levels, but the market will need a good catalyst to kick off the pullback. As long as the US data remains strong and the Japanese data doesn’t show a pick-up in wages, we might see further upside in the bigger picture.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the USDJPY has been diverging with the MACD for a long time and this is generally a sign of weakening momentum often followed by pullbacks or reversals. The price action has also formed what looks like a rising wedge, which is a reversal pattern. The sellers are likely to step in here around the upper bound of the wedge and target the break below the lower bound of the pattern which is eventually likely to cause a selloff into the 145.00 support.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that in case of a pullback, the buyers are likely to lean on the previous resistance turned support around the 148.45 level where there’s also the confluence with the 38.2% Fibonacci retracement level and the 4-hour red 21 moving average. In case of a break lower, the sellers will pile in even more targeting the lower bound of the wedge.
Upcoming Events
Today we will see the latest US Consumer Confidence report which surprised to the downside the last time and weighed on the USD in the short term as Treasury yields fell. On Thursday, we will have another US Jobless Claims data which keeps on showing strength in the labour market maintaining the hawkish pricing in interest rates expectations. Finally, on Friday, we will get the latest US PCE data and a few Japanese economic releases such as the Tokyo CPI, the Unemployment Rate and Retail Sales.