US:
- The Fed left interest rates unchanged as expected.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US CPI came in line with expectations, so the market’s pricing remained roughly the same.
- The labour market displayed signs of softening although it remains fairly solid as seen also yesterday with the strong beat in Jobless Claims.
- The market doesn’t expect the Fed to hike again at the moment.
Japan:
- The BoJ kept everything unchanged as expected.
- The Japanese CPI today showed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
- The Unemployment Rate surprisingly increased recently, although it remains near cycle lows.
- The Japanese Manufacturing PMI fell further into contraction but the Services PMI remains in expansion.
- BoJ governor Ueda repeated that they will not hesitate to take additional easing measures if needed and clarified that the recent comment on “quiet exit” from monetary easing was misinterpreted.
- The recent Japanese wage data showed a slowing in 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 remains in an uptrend, but the bullish momentum is clearly waning. The red 21 moving average continues to act as dynamic support and the fundamentals keep supporting more upside for the pair, but it looks like one ugly economic release for the US could make the pair fall hard to the 145.00 level. For now, the 150.00 level remains the target for the buyers.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a massive divergence with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we only got pullbacks, but the price action has been forming what looks like a rising wedge, which is a reversal pattern. So, this will be something to watch out for.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price action is very messy and it’s hard to find clear levels to lean on. Nonetheless, we have two key levels to watch now. A break above the recent high at 148.47 should see more buyers coming into the market and keep the uptrend going, while a break below the low at 147.32 should confirm the break of the rising wedge and lead the pair to the 145.00 support.
Upcoming Events
Today we only have the Flash PMIs for the US before we head into the weekend. Strong data is likely to keep the pair supported but weak readings might cause a selloff.
