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 last week, while the US Jobless Claims remained
solid. - Fed Chair Powell’s speech at the Jackson Hole Symposium was
mostly in line with what he said previously but he stressed on the need to be
careful going forward and that continued strength in the labour market may
require further rate hikes. - 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 at the last meeting but
implicitly tweaked the YCC policy keeping the target band unchanged but giving
more flexibility with a hard cap at 1.00%. - This has created lots of volatility
in the JPY, but eventually led to a fast depreciation. - The Japanese CPI data surprised to the upside recently
with the core-core reading reaching again the previous high. - 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. - The Unemployment Rate surprisingly jumped to 2.7%
although it remains near the lows. - BoJ’s Governor Ueda at the Jackson Hole Symposium
reaffirmed that inflation is still below target and that’s why they’re sticking
with their monetary easing.
USDJPY Technical Analysis –
Daily Timeframe
USDJPY Daily
On the daily chart, we can see
that USDJPY continues to rise to new highs after breaking out of the 145.00
handle. The natural target for the buyers should be the 150.00 handle but the
momentum seems to be slowing as the market awaits key economic data. The
sellers will need the price to fall below the 145.00 level to switch the bias
from bullish to bearish and start targeting lower lows.
USDJPY Technical Analysis –
4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can see that the pair has
been diverging with the
MACD for a
long time which is generally a sign of weakening momentum often followed by
pullbacks or reversals. In fact, recently the pair pulled back to the 145.00 resistance turned support and
bounced strongly from the 38.2% Fibonacci retracement level.
The price is now struggling to break above the recent high at 146.56 as the
market awaits the data to gather more momentum.
USDJPY Technical Analysis –
1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can see that the
price action around the 145.00 handle created a possible bullish flag pattern. The
price broke out last Friday following Fed Chair Powell’s comments and given the
BoJ’s stance, it looks like we might see higher highs coming soon. We can also
notice that we have another divergence with the MACD right at the previous high
which might be a sign that a pullback may be due. In that case, we should see
the buyers coming into the market around the 38.2% Fibonacci retracement level.
Upcoming Events
This week is an important one given that we will see
many key labour market data for the US, including the NFP, before the next FOMC
meeting. Today, we have the US Consumer Confidence and the US Job Openings
reports. Tomorrow, we have the US ADP report. Moving on to Thursday, we will
see the US Jobless Claims and the US PCE data. Finally, we conclude the week
with the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps
all the options on the table, it’s also leaning more towards a pause in September,
so we will need strong data to make the market to expect a hike at the upcoming
meeting.