USDJPY Technical Analysis | Forexlive

USD

The Fed left interest rates unchanged as expected with a shift in the statement that
indicated the end of the tightening cycle.
The Summary of Economic Projections showed a
downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
in 2024 compared to just two in the last projection.
Fed Chair Powell didn’t push back against the strong dovish pricing
and even said that they are focused on not making the mistake of holding rates
high for too long, which implies a rate cut coming soon.
The US CPI this week came in line with expectations
with the disinflationary progress continuing steady. This was also confirmed by
the US PPI the day after where the data missed
estimates.
The labour market has been showing signs of
weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
in strongly.
The latest ISM Manufacturing PMI missed expectations falling further into
contraction, while the ISM Services PMI beat forecasts holding on in expansion.
The market expects the Fed to start cutting rates
in Q1 2024.

JPY

The BoJ kept its monetary policy basically unchanged at the last meeting 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 latest Japanese CPIshowed that inflationary pressures are
easing although they remain well above the BoJ’s 2% target.
The latest Unemployment Rate remained unchanged near cycle lows.
The Japanese Manufacturing PMI fell further into contraction but
the Services PMI ticked higher remaining in expansion.
The latest Japanese wage data beat expectations and as a reminder
the BoJ is focusing on wage growth to decide whether to tweak its monetary
policy.
The BoJ Governor Ueda last week delivered some
interesting comments where it looked like the central bank was indeed
considering rate hikes in 2024.
The market expects the BoJ to hike
rates in Q2 2024.

USDJPY Technical Analysis –
Daily Timeframe

USDJPY Daily

On the daily chart, we can see
that USDJPY pulled back into the blue 8 moving average
following the selloff caused by BoJ Governor Ueda’s comments. The sellers leant
on the moving average to position for new lows as the market continued to price
in rate cuts for the Fed in 2024. In a surprise move, the Fed came out much
more dovish than expected and triggered another big selloff in the pair with
the price reaching the previous lows. The target for the sellers continues to
be the swing low at the 138.00 handle.

USDJPY
Technical Analysis – 4 hour Timeframe

USDJPY 4 hour

On the 4 hour chart, we can see that the pullback
from Ueda’s comments got rejected around a strong resistance zone
where we had the confluence of the trendline and the
previous swing low level. After a small bounce on the key 145.00 handle, the
price tumbled as soon as the pair broke below the level as the sellers piled in
aggressively following the more dovish than expected Fed. The pair is now
consolidating around the lows as the US data yesterday came out much better
than expected with strong retail sales and jobless claims.

USDJPY Technical Analysis –
1 hour Timeframe

USDJPY 1 hour

On the 1 hour chart, we can see that the
pair is trading inside a rising channel which might turn into a bearish flag if the
price breaks below the lower bound of the channel. The sellers will have two
options:

Selling
at the upper bound of the channel where we have also the 38.2% Fibonacci
retracement level for confluence.
Selling
on the break below the lower bound of the channel.

The buyers, on the other hand, will want
to see the price breaking above the 38.2% Fibonacci retracement level to
position for a rally all the way back to the trendline around the 145.00
handle.