Anticipation Builds for USDJPY Technical Analysis – Awaiting a Price Breakthrough

US

• The Fed left interest rates unchanged as expected at the last meeting.
• The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
• Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
• The US CPI beat expectations on the headline figures, but the core measures came in line with forecasts and the market’s pricing barely changed.
• The labour market remains pretty resilient as seen once again last week with the beat inJobless Claims, although continuing claims missed for a second time in a row.
• The US Retail Sales last week beat expectations by a big margin with positive revisions to the prior figures, suggesting the consumers’ spending is still solid.
• Yesterday’s US PMIs showed that the economy now looks more balanced and resilient.
• Fed Chair Powelland other FOMC members continue to highlight the rise in long term yields as doing the job for the Fed and therefore they are expected to keep rates steady in November as well.
• The market doesn’t expect the Fed to hike anymore.

Japan

• The BoJ kept everything unchanged as expected at the last meeting.
• The Japanese CPIlast week showed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
• The Unemployment Rate last month 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.
• BoJ officials continue to repeat that the central bank should keep the current monetary policy.
• The latest Japanese wage data missed expectations again which is unlikely to lead to a more hawkish BoJ in the near future.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that the USDJPY pair is getting more and more compressed into the key 150.00 level, but lacks the courage to push above it due to intervention fears. We can also notice that we’ve been diverging with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we only got pullbacks into the red 21 moving average, which is acting as dynamic support for the buyers. It’s a waiting game until some key level breaks or we get some strong fundamental catalyst.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price action has formed what looks like an ascending triangle with the 150.00 resistance and the trendline defining the pattern. A breakout on either side generally triggers a strong and sustained move in the direction of the breakout, so the market participants can sit on their hands and wait for the price to show the most likely direction.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the price yesterday bounced on the trendline and the 149.35 support as the market didn’t have enough conviction to break to the downside. In fact, the US PMIs later in the day beat expectations, showing once again that the US economy remains resilient. Given the Fed’s higher for longer mantra and the BoJ’s inaction, the USDJPY pair has limited downside until the US data weakens meaningfully or the BoJ turns hawkish.

Upcoming Events

Tomorrow we will see the latest US Jobless Claims data with the market likely focusing on the Continuing Claims figures as they’ve missed expectations two times in a row already and might be a signal that the labour market is weakening. On Friday, we will get the Tokyo CPI and the US PCE reports which are unlikely to change anything for the near-term policy outlook.

See the video below