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.
- The US CPI last week 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.
- The other important economic data like the ISM Services PMI, Jobless Claims and Retail Sales all beat expectations recently.
- The Fed members are leaning towards a pause in September and the next decision will still be dictated by the economic data.
- The market doesn’t expect the Fed to hike at the September meeting, but there’s now basically a 50/50 chance of a hike in November.
Japan:
- The BoJ kept everything unchanged as expected at the last meeting but 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 increased recently, although it remains near cycle lows.
- BoJ Governor Ueda last week said that his focus is on a quiet exit from the monetary easing and added that the BoJ should have enough data by year end to decide how to proceed.
- The Japanese wage data last week 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 the USDJPY pair looks to be trading within a rising channel with the upper bound and the 150.00 handle being the target on the upside. The recent bounce on the black trendline and the red 21 moving average led to a rally into the 147.85 resistance where the price started to struggle. A break above the resistance should lead to a rally into the 150.00 handle, while a break below the trendline might cause a selloff into the 145.00 support.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price action around the resistance has created an ascending triangle. Generally, when the price breaks out of such patterns, we can see a strong and sustained move following on. So, a break to the upside should see more buyers piling in and target the 150.00 resistance, while a break lower is likely to see more sellers stepping in and target the 145.00 support.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is testing the trendline again which is where we can expect the buyers to pile in as well with a defined risk below the trendline to target a break to the upside.
Upcoming Events
This week has just a couple of important economic releases with the FOMC and BoJ rate decisions being the highlight. Tomorrow, the Fed is expected to keep rates unchanged, and the market will focus more on the Dot Plot and Fed Chair Powell’s press conference, although he’s likely to repeat that they remain data dependent. On Thursday, we will get the US Jobless Claims data. On Friday, we will see the latest Japan CPI report and then move on to the BoJ policy decision where the central bank is expected to keep everything unchanged. Later in the day we conclude the week with the US PMIs data.
