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%.
- The US PMIs missed expectations across the board last week, while the US Jobless Claims remained solid.
- Fed Chair Powell’s speech at the Jackson Hole Symposium was mostly in line with what he said previously but he stressed on the need to be careful going forward and that continued strength in the labour market may require further rate hikes.
- 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 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%.
- This has created lots of volatility in the JPY, but eventually led to a fast depreciation.
- The Japanese CPI data surprised to the upside recently with the core-core reading reaching again the previous high.
- The Tokyo CPI, which is seen as a leading indicator for national cpi, missed expectations, but the core-core reading matched the prior figure remaining well above the BoJ’s inflation target.
- The Unemployment Rate surprisingly jumped to 2.7% although it remains near the lows.
- BoJ’s 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.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY continues to rise to new highs after breaking out of the 145.00 handle. The natural target for the buyers should be the 150.00 handle but the momentum seems to be slowing as the market awaits key economic data. The sellers will need the price to fall below the 145.00 level to switch the bias from bullish to bearish and start targeting lower lows.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been diverging with the MACD for a long time which is generally a sign of weakening momentum often followed by pullbacks or reversals. In fact, recently the pair pulled back to the 145.00 resistance turned support and bounced strongly from the 38.2% Fibonacci retracement level. The price is now struggling to break above the recent high at 146.56 as the market awaits the data to gather more momentum.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price action around the 145.00 handle created a possible bullish flag pattern. The price broke out last Friday following Fed Chair Powell’s comments and given the BoJ’s stance, it looks like we might see higher highs coming soon. We can also notice that we have another divergence with the MACD right at the previous high which might be a sign that a pullback may be due. In that case, we should see the buyers coming into the market around the 38.2% Fibonacci retracement level.
Upcoming Events
This week is an important one given that we will see many key labour market data for the US, including the NFP, before the next FOMC meeting. Today, we have the US Consumer Confidence and the US Job Openings reports. Tomorrow, we have the US ADP report. Moving on to Thursday, we will see the US Jobless Claims and the US PCE data. Finally, we conclude the week with the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps all the options on the table, it’s also leaning more towards a pause in September, so we will need strong data to make the market to expect a hike at the upcoming meeting.
