US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation measures since then showed further disinflation.
- The labour market displayed signs of softening although it remains fairly solid.
- Overall, the economic data started to surprise to the downside lately.
- This week the ISM Services PMI and Jobless Claims surprised to the upside.
- The Fed members are leaning more towards a pause in September rather than another rate hike.
- The market doesn’t expect the Fed to hike at the September meeting, but there’s now a 50/50 chance of a hike in November.
Japan:
- The BoJ kept everything unchanged as expected at the last meeting but implicitly tweaked the YCC policy keeping the target band unchanged but giving more flexibility with a hard cap at 1.00%.
- The Japanese CPI data surprised to the upside recently with the core-core reading reaching again the previous high.
- The Unemployment Rate surprisingly jumped to 2.7% recently, although it remains near the lows.
- BoJ Governor Ueda at the Jackson Hole Symposium reaffirmed that inflation is still below target and that’s why they’re sticking with their monetary easing. This was also echoed by other BoJ members, although they are starting to see the light at the end of the tunnel.
- The Japanese wage data today showed a slowing wage growth, and this is something the BoJ focuses on particularly.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is trading within a rising channel and the red 21 moving average is acting as dynamic support for the buyers. We recently got a classic “break and retest” on the 146.56 resistance turned support and given the recent strong US data and weak Japanese wage growth, we should see the pair starting to climb up again with the target standing at the 150.00 handle.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the break and retest pattern on the 146.56 support where we had also the confluence with the 38.2% Fibonacci retracement level. The buyers should start to pile in here with a defined risk below the support and target the 150.00 handle. The sellers, on the other hand, will want to see the price to fall below the support invalidating the bullish setup and pile in for a fall into the 145.00 support.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline defining the recent short-term downtrend. If the price breaks above the trendline and the recent swing high around the 147.38 level, the buyers will have another confirmation that a rally into the 150.00 handle may be about to start.
See also the video below