USD

  • The Fed left interest rates unchanged as expected at the last meeting and dropped the tightening bias in the statement.
  • The US CPI and the US PPI beat expectations for the second consecutive month.
  • The NFP report beat expectations on the headline number, but the unemployment rate and the average hourly earnings missed notably. Moreover, the US Jobless Claims beat expectations across the board with a big positive revision to Continuing Claims.
  • The latest US ISM Manufacturing PMI missed expectations by a big margin remaining in contraction with the US ISM Services PMI following suit but holding on in expansion.
  • The US Retail Sales missed expectations across the board although the data improved from the prior month.
  • The market sees basically a 50/50 chance of a hike in June now.

JPY

  • The BoJ finally exited the negative interest rates policy as expected raising interest rates by 10 bps bringing the rate to a target between 0.00-0.10%. Moreover, the central bank scrapped the yield curve control and the ETF purchases, while maintaining QE in place as expected.
  • BoJ Governor Ueda said that they are at a phase where they can slowly proceed with possible rate hikes. So, the data will be important in the next months for further actions.
  • The latest Unemployment Rate remained unchanged hovering around cycle lows.
  • The Japanese PMIs improved for both the Manufacturing and Services measures although the former remains in contractionary territory.
  • The Japanese wage data beat expectations by a big margin which then led to the rate hike from the BoJ.
  • The Tokyo CPI, which is seen as a leading indicator for National CPI, recently came in line with expectations with the measures increasing from the prior report.

USDJPY Technical Analysis – Daily Timeframe

USDJPY Technical Analysis
USDJPY Daily

On the daily chart, we can see that USDJPY bounced on the 146.50 level and started to rally with almost no pullback as the strong US data switched the market focus from the BoJ to a possibly hawkish FOMC rate decision. The price today broke through the 150 handle as the market “sold the fact” on the BoJ hike and further Yen gains will depend on the next set of data. There’s not much else to glean from this timeframe, so we need to zoom in to see some more details.

USDJPY Technical Analysis – 4 hour Timeframe

USDJPY Technical Analysis
USDJPY 4 hour

On the 4 hour chart, we can see that we have a support now around the 149.21 level where we can also find the confluence of the trendline and the red 21 moving average. If we were to get a pullback, that’s where we can expect the buyers to step in with a defined risk below the support to position for a rally into new highs with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower to pile in and position for a drop into new lows.

USDJPY Technical Analysis – 1 hour Timeframe

USDJPY Technical Analysis
USDJPY 1 hour

On the 1 hour chart, we can see more closely the recent price action with the support zone highlighted by the green box. The buyers will look for a bounce, while the sellers will look for a breakout. The events in the next days and weeks will determine where we go from here.

Upcoming Events

Tomorrow we have the FOMC rate decision on the agenda where the central bank is expected to keep rates unchanged. On Thursday, we have the US Jobless Claims figures and the latest Japanese and US PMIs. Finally, on Friday, we conclude the week with the Japanese CPI data.

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