USD

  • The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement. The Dot Plot still showed three rate cuts for 2024 and the economic projections were upgraded with growth and inflation higher and the unemployment rate lower.
  • The US CPI beat expectations for the third consecutive month, while the US PPI came in line with forecasts.
  • The US NFP beat expectations across the board although the average hourly earnings came in line with forecasts.
  • The US ISM Manufacturing PMI beat expectations by a big margin with the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to the lowest level in 4 years.
  • The US Retail Sales beat expectations across the board by a big margin with positive revisions to the prior figures.
  • The market now expects the first rate cut in September.

JPY

  • The BoJ finally exited the negative interest rates policy as expected at the last meeting 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.
  • The latest Unemployment Rate missed expectations although it continues to hover around cycle lows.
  • The Japanese PMIs improved further for both the Manufacturing and Services measures although the former remains in contractionary territory.
  • The latest Japanese wage data came in line with expectations.
  • The Tokyo CPI, which is seen as a leading indicator for National CPI, came in line with expectations.
  • The market expects another rate hike from the BoJ this year although the timing remains uncertain.

USDJPY Technical Analysis – Daily Timeframe

USDJPY Technical Analysis
USDJPY Daily

On the daily chart, we can see that USDJPY finally broke out of the consolidation following another hot US CPI report. This breakout opened the door for much higher prices with no real resistance in sight until the 160.00 handle. From a risk management perspective, the buyers will have a much better risk to reward setup around the previous resistance now turned support where we can also find the confluence of the trendline and the 38.2% Fibonacci retracement level. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a drop into the next major trendline around the 146.00 handle.

USDJPY Technical Analysis – 4 hour Timeframe

USDJPY Technical Analysis
USDJPY 4 hour

On the 4 hour chart, we can see that we have another trendline where the buyers can lean onto in case of a pullback where they will also find the 38.2% Fibonacci retracement level for confluence. The sellers, on the other hand, will want to see the price breaking lower to position for a break below the 151.92 support zone with a better risk to reward ratio.

USDJPY Technical Analysis – 1 hour Timeframe

USDJPY Technical Analysis
USDJPY 1 hour

On the 1 hour chart, we can see that the price has been diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it could be a signal for a pullback into the trendline and the Fibonacci retracement level around the 152.50 level. The price will need to break below the most recent swing low at 153.87 to confirm the bigger pullback as the sellers will likely pile in more aggressively to target the 152.50 level.

Upcoming Events

On Thursday we get the latest US Jobless Claims figures, while on Friday we conclude the week with the Japanese CPI.

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