Technical Analysis of USD/JPY: The US Dollar gained from a spike in Treasury yields and hawkish remarks from the Fed, wiping out nearly all of the previous week’s losses for the USDJPY pair. Next, what?
US
With essentially no changes to the statement, the Fed maintained interest rates as anticipated.
Since the full impact of tightening policy has not yet been felt, Fed Chair Powell emphasized once more that they are moving cautiously. – Technical Analysis of USD/JPY
The most recent US Core PCE was forecast to be positive.
The labor market is beginning to exhibit signs of weakness, as evidenced by the increase in Continuing Claims reported yesterday and the overall miss in the NFP data last Friday.
Even though the data exceeded expectations, US consumer confidence decreased for the third consecutive month.
Although the index continued to rise, the US ISM Manufacturing PMI last week significantly underperformed expectations. Later on Friday, the ISM Services PMI was also disappointed.
The market no longer expects the Fed to raise interest rates.
Japan
The BoJ formally expanded the YCC to 1% on the 10-year JGBs and declared that it will serve as a reference cap, while essentially maintaining its current monetary policy.
Governor Ueda reaffirmed that they do not anticipate sustainable price increases and that they will not be reluctant to implement easing measures if necessary.
With the core-core reading lingering near cycle highs, the most recent Japanese CPI indicated that inflationary pressures are still quite high.
At cycle lows, the unemployment rate did not change.
While the Services PMI continued to expand despite declining, the Japanese Manufacturing PMI remained in contraction, matching the previous reading.
The most recent Japanese wage data exceeded expectations. As a reminder, the Bank of Japan is focusing on wage growth to determine when to adjust its monetary policy.
The market expects the Bank of Japan to keep interest rates unchanged at its next meeting.
