The Fed hiked interest rates by 25 bps as expected leaving everything else unchanged. Fed Chair Powell didn’t hint to anything in his press conference and just reaffirmed their data dependency keeping all the options on the table. The data since the FOMC meeting has been supporting the soft-landing narrative as the labour market indicators keep on showing strength, while the inflation readings keep on missing expectations.
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 as the market probably expected something more.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY tested again the strong support at 137.95, where we had also the 61.8% Fibonacci retracement level, and rallied towards the 144.00 handle. This might turn into a double bottom within a trend, so the 142.17 resistance turned support would act as the neckline. The target for the buyers in this case should be the 148.00 or even 150.00 level.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has also broke above the counter-trendline and extended the rally towards the 144.00 resistance. The current pullback is near a good support zone where we have the confluence with the red 21 moving average and the previous swing high level. This is where the buyers should pile in with a defined risk below the level to target the 148.00 level.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we had a divergence with the MACD that eventually led to the pullback. In fact, this is generally a signal of weakening momentum often followed by pullbacks or reversals. Here, we can see more closely the support zone around the 142.00 handle. The sellers will want to see the price breaking lower to pile in and extend the fall into the 137.95 support, while the buyers are likely to step in to target the 148.00 handle.
Upcoming Events
Today the only notable event on the agenda is the US ADP report. This is a less reliable labour market indicator, but it still moves the market upon its release. Tomorrow, the market will be focused on the US Jobless Claims and ISM Services PMI data, while on Friday, we conclude the week with the US NFP report. Strong data should support the US Dollar as the market expectations would lean on the more hawkish side. On the other hand, if we see weaker readings, the market may be even more confident about the end of the hiking cycle and lead to a weaker USD.
