The Fed hiked interest rates by 25 bps as expected leaving the policy
statement unchanged. Tha market was more focused on hints and clues on the next
Fed moves but it got disappointed as Fed Chair Powell has just reaffirmed their
data dependency and kept all options on the table. Yesterday, the USD
strengthened across the board as the US Jobless Claims beat expectations by a
big margin again giving the markets hawkish vibes.
On the other hand, we got
two days of high volatility in the JPY as yesterday we got a leak from Nikkei saying that the BoJ will discuss
tweaking the YCC policy at the upcoming meeting, which was the opposite of what
the Reuters leak said last week. Today, the BoJ kept everything unchanged as expected but indeed implicitly
tweaked the YCC policy keeping the target band unchanged but giving more
flexibility with a hard cap at 1.00%. So, they basically widened the YCC band
without stating it explicitly.
USDJPY Technical Analysis –
Daily Timeframe
USDJPY Daily
On the daily chart, we can see
that the rally in USDJPY from the 137.95 support got
rejected around the 142.00 handle where we had the confluence of the
61.8% Fibonacci retracement level
and the red 21 moving average. The
price is now contained in this wider range, but the bias is now more bearish.
USDJPY Technical Analysis –
4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can see that we had the
sellers leaning on the top trendline to
position for more downside, and then the whipsaws following the Nikkei leak and
the BoJ policy decision. The sellers will now try to find a resistance where
they can lean onto to position for a breakout lower. More conservative sellers
are likely to wait for the price to break below the 137.95 support before
piling in and target the 134.00 swing low.
USDJPY Technical Analysis –
1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can see that we
have a pretty good resistance zone around the 140.00 handle where there’s also
the red 21 moving average for confluence. This is where the sellers are likely
to pile in with a defined risk above the level and target a break below the
support. The buyers, on the other hand, will keep on piling in at every upside
breakout and are likely to switch the bias to bullish in case the price rises
above the 141.00 handle.
Upcoming Events
Today the market will
be watching the US PCE and the Employment Cost Index reports. Given that the
PCE is less timely than the CPI and the market is already looking forward to
the next month’s inflation report, we shouldn’t see much movement from the PCE
unless there’s a big surprise. In fact, the Employment Cost Index is likely to
be more important given the Fed’s focus on wage inflation and the tight labour
market. A higher than expected reading should give the US Dollar a short-term
boost, while a lower than expected figure should send the USDJPY lower.
See also the video below: