The Fed is waiting for the totality of the data to be released before deciding what to do at their September meeting. As of now, the data supports the soft-landing narrative as the disinflation in the core measures continues but the strength in the labour market and consumer spending might keep inflation higher for longer. This is something that might translate into more rate hikes or a “higher for longer-er” stance. Recently the long-term Treasury yields have been rising non-stop and this has benefited the US Dollar but the reason for such a rally is still unclear.
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. The BoJ has also already intervened twice to smooth the rise in yields ultimately weighing on the JPY. Today, the Japanese CPI data surprised to the upside with the core-core reading rising further.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY broke above the previous high at the 145.00 handle and the breakout might point to a rally towards the 150.00 level. We recently retested the resistance turned support and what happens next will decide if we go higher or lower as a fall back below the 145.00 handle should point to a deeper pullback. Note also that the 145.00-150.00 range is considered the “intervention territory” for the BoJ.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price recently fell below the red 21 moving average which was acting as a great dynamic support. Maybe it’s an early sign of reversal? If the price falls below the 145.00 handle, the sellers should start to look forward to it and take the price into the 142.00 handle. We can also notice that we’ve been diverging with the MACD and this is generally a sign of weakening momentum often followed by pullbacks or reversals.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has bounced near the 145.00 support and it’s now approaching a strong short-term resistance around the 145.60 level where we have the confluence with the previous swing low level, the 38.2% Fibonacci retracement level and the red 21 moving average. We can expect the sellers piling in here with a defined risk above the resistance and target the 142.00 handle. The buyers, on the other hand, will need the price to break above the resistance to pile in and extend the rally towards new highs.
