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 and brought down Treasury yields weakening the US Dollar, but the US Jobless Claims came out better than expected once again and supported the USD.
  • 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 but implicitly tweaked the YCC policy keeping the target band unchanged but giving more flexibility with a hard cap at 1.00%.
  • 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.
  • Last week, the Japanese CPI data surprised to the upside with the core-core reading reaching again the previous high.
  • Today, 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.

USDJPY Technical Analysis – Daily Timeframe

USDJPY Technical Analysis
USDJPY Daily

On the daily chart, we can see that USDJPY started to consolidate just above the broken high at the 145.00 handle. The pair remains firmly in an uptrend as the price keeps printing higher highs and higher lows with the moving averages being crossed to the upside. The market might be waiting for some fresh catalyst for the next major move, so paying attention to the data will be key.

USDJPY Technical Analysis – 4 hour Timeframe

USDJPY Technical Analysis
USDJPY 4 hour

On the 4 hour chart, we can see that the price has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a pullback into the 145.00 support where we had also the confluence with the 38.2% Fibonacci retracement level. The buyers piled in with a defined risk below the support zone to target a new higher high.

USDJPY Technical Analysis – 1 hour Timeframe

USDJPY Technical Analysis
USDJPY 1 hour

On the 1 hour chart, we can see that we have a top trendline that is acting as resistance. This might turn into a bullish flag pattern, so a break to the upside should see more buyers piling in and take the price to new highs. The sellers, on the other hand, might lean on this trendline to position for a downside move into the 145.00 support zone and then pile in even more aggressively in case the price breaks through the support.

Upcoming Events

Today the only major event is Fed Chair Powell’s speech at the Jackson Hole Symposium. The expectations though are for him to take a “wait and see” approach as we have more key economic data ahead before the next FOMC meeting.

See also the video below: