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 Q1 GDP surprisingly missed expectations although the core components showed a strong economy, nonetheless. The Core PCE though surprised to the upside pushing rate cuts further away.
  • 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 PMIs missed expectations in April with the commentary citing lower inflationary pressures but also increased layoffs.
  • The market expects the first rate cut in September.

JPY

  • The BoJ left interest rates unchanged as expected with no other major change.
  • 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 considered a leading indicator for National CPI, missed expectations across the board by a big margin although it was attributed to a one-off factor.
  • 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 eventually managed to break through the key 155.00 handle and extended the rally into new highs as the Japanese officials continue to refrain from an intervention given the strong fundamentals against the Yen. From a risk management perspective, it’s worth to keep an eye on the trendline around the 151.92 level where we can also find the 50.0% Fibonacci retracement level for confluence. If the price gets there at some point, we can expect the buyers to step in with a defined risk below the trendline to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets 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 the price is starting to diverge with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal for a pullback into the minor trendline around the previous resistance now turned support at 155.00. That’s where the buyers will look to buy the dip with a defined risk below the trendline to position for a rally into the 160.00 handle. The sellers, on the other hand, will want to see the price breaking lower to position for a drop into the 151.92 support zone.

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 spike higher following the unchanged BoJ policy decision and Governor Ueda’s comments. The first opportunity to buy the dip will come around another minor trendline where we have also the 61.8% Fibonacci retracement level for confluence. The sellers, on the other hand, will look for a break lower to position for a drop into the next trendline around the 154.60 level.

Upcoming Events

Today we conclude the week with the US PCE report.