US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US economic data keeps on surprising to the upside, but inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- At the moment, the market doesn’t expect another hike from the Fed, but the next NFP and CPI data will be crucial to confirm or change this view.
Japan:
- 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%.
- 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.
- The BoJ has also already intervened twice to smooth the rise in yields ultimately weighing on the JPY.
- Last week, the Japanese CPI data surprised to the upside with the core-core reading reaching again the previous high.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that from the double bottom at the 138.00 handle created after the BoJ policy meeting, USDJPY just kept on rising with just one notable pullback. The pair recently broke above the previous high at the 145.00 handle, but it’s struggling to keep with its rally as the market may be awaiting new catalysts. It’s also worth reminding that the 145.00-150.00 range is considered the “intervention territory” as the BoJ last year intervened more than once around these levels.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been diverging with the MACD for a while and this is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the 145.00 support will be key to determine if we will get just a pullback or a reversal.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we now have a range between the 145.00 support and the 146.50 resistance. If the price falls back to the support, we can expect the buyers to pile in with a defined risk below the level and target new highs. The sellers, on the other hand, will want to see the price breaking below the support to pile in and extend the fall into new lows with the 142.00 handle being the first target.
Upcoming Events
This week is pretty empty on the economic data side as we will only have the PMIs tomorrow and the US Jobless Claims on Thursday. Given the strong appreciation in the US Dollar seen in the past weeks, we can expect some USD weakness if the data misses expectations, and we will likely need much stronger than expected readings to see another sustained rally in the greenback. Remember also that this is the Jackson Hole Symposium week, so we will hear from many central bankers including Fed Chair Powell, who is set to speak on Friday.
