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  • The Fed left interest rates unchanged as
    expected with basically no change to the statement.
  • Fed Chair Powell stressed
    once again that they are proceeding carefully as the full effects of policy
    tightening have yet to be felt.
  • The recent US Core PCE came
    in line with expectations.
  • The labour market is
    starting to show some weakness as Continuing Claims are now
    rising at a fast pace and the NFP data
    last Friday missed across the board.
  • The US Consumer
    fell for the third consecutive month
    although the data beat expectations.
  • The US ISM
    Manufacturing PMI
    last week missed expectations by a big
    margin, followed later on Friday with a disappointing ISM Services PMI,
    although the index remained in expansion.
  • The market doesn’t expect the Fed to hike anymore.


  • The BoJ kept its monetary policy basically unchanged but formally widened the YCC to 1%
    on the 10-year JGBs stating that it will be a reference cap.
  • Governor Ueda repeated once again that they won’t
    hesitate to take easing measures if needed and that they are not foreseeing
    sustainable price increases.
  • The recent Japanese CPIshowed that inflationary pressures
    remain high with the core-core reading hovering at the cycle highs.
  • The Unemployment Rate remained unchanged near cycle lows.
  • The Japanese Manufacturing PMI matched the prior reading remaining
    in contraction with the Services PMI falling but holding on in expansion.
  • The latest Japanese wage data beat expectations. As a reminder
    the BoJ is focusing on wage growth to decide when to tweak its monetary policy.
  • The market expects the BoJ to keep
    interest rates unchanged at the next meeting as well.

USDJPY Technical Analysis –
Daily Timeframe


On the daily chart, we can see
that the USDJPY pair retreated from the cycle high as Treasury yields fell in
the final part of last week following weaker than expected US labour market
data. We can also notice that the divergence with the
getting bigger and bigger and given the changing outlook for the US labour
market, we might be around the top for the pair. The first target for the
sellers should be the trendline around
the 146.00 handle.

USDJPY Technical Analysis –
4 hour Timeframe

USDJPY 4 hour

On the 4 hour chart, we can see that the pair
bounced around the upward trendline in the final hours of last Friday and
extended the rally in the first part of the week as Treasury yields reversed
most of the drop following the disappointing US data. The price is now trading
around a resistance zone
where we can also find the 61.8% Fibonacci retracement level
for confluence.

The sellers are likely to step in with a defined
risk above the Fibonacci level to position for a drop back into the trendline
and eventually target a breakout. The buyers, on the other hand, will want to
see the price breaking higher to invalidate the bearish setup and position for
a rally back into the highs.

USDJPY Technical Analysis –
1 hour Timeframe

USDJPY 1 hour

On the 1 hour chart, we can see that the
price is now diverging with the MACD right into the resistance zone. This is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, if the price breaks below the recent swing low at
150.30 we can expect more selling pressure coming into the market and take the
pair into the trendline.

Upcoming Events

This week is pretty empty on the data front with just
the US Jobless Claims tomorrow and the University of Michigan Consumer
Sentiment on Friday being the only notable events. The market is likely to
focus on the US Jobless Claims given the recent weakness in the labour market
data. Strong readings are likely to lift Treasury yields and push the USDJPY
pair higher. On the other hand, weak figures should lead to more downside for
Treasury yields and take the USDJPY pair lower with them.

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