USD
- The Fed left interest rates unchanged, as expected at its previous meeting, and revised its statement to signal the end of its tightening cycle.
- A summary of economic forecasts showed that the unemployment rate will remain unchanged, while the growth rate and core PCE for 2024 will be revised downward. Additionally, the dotplot has been revised to show three rate cuts in 2024, compared to just two in the previous forecast.
- Fed Chairman Jerome Powell has not balked at dovish pricing and even said he is focused on not making the mistake of keeping interest rates high for too long.
- The latest US CPI was slightly above expectations, but analysts expect core PCE to be 0.2% again following the CPI data.
- The labor market continues to weaken, even as new claims continue to hover near cycle lows and continuing claims remain high.
- The latest ISM Manufacturing PMI was better than expected, but the ISM Services PMI was significantly lower.
- Hawkish Fed members have recently moved toward more neutral positions.
- The market expects the Fed to start cutting interest rates in the first quarter of 2024.
JPY
- The Bank of Japan left monetary policy unchanged at its previous meeting, leaving interest rates at minus 0.10% and the 10-year government bond yield target at 0%, including the standard upper limit of 1%.
- Governor Ueda reiterated that he will not hesitate to take easing measures if necessary, and that he does not expect sustained price increases unless wage growth accelerates.
- The latest Japanese CPI shows inflation pressures are easing, although it is still well above the Bank of Japan's 2% target.
- The latest unemployment rate was unchanged near cycle lows.
- Japan's manufacturing PMI has further shrunk, but the services PMI has continued to expand.
- The latest Japanese wage figures were significantly lower than expected, a reminder that the Bank of Japan is focusing on wage growth to decide whether to adjust monetary policy.
- The Tokyo CPI, which is considered a leading indicator of the national CPI, has eased further, but the core-core index remains at cycle highs.
USDJPY Technical Analysis – Daily time frame
usd yen daily
On the daily chart, we can see that yesterday's USDJPY surged into a key resistance zone around the 146.60 level, where there was also a confluence at the 50% Fibonacci retracement level. The pair quickly reversed as sellers intervened with a clear risk of breaking above resistance for a fall to new lows.
USDJPY Technical Analysis – 4 hour timeframe
US dollar yen 4 hours
On the 4-hour chart, we can see that the price rejects the important support zone around the 145.00 handle. There we find the confluence with the trend line, the red 21 moving average, and the 50% Fibonacci retracement level. This is where buyers are likely to congregate below the trend line with clear risks, positioning for a bounce back to resistance and looking to break out above it.
USDJPY Technical Analysis – 1 hour timeframe
US dollar yen 1 hour
The 1-hour chart gives you a closer look at the current price movement, as the price is reacting to the trendline. If the price breaks below the trend line, the bullish setup will be invalidated and sellers will increase their bearish bets with an initial target at the swing low around the 143.50 level.
upcoming events
The only notable event on the agenda today is the US PPI data, with an unexpected upside that could push the USD higher in the near term.
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