Basic overview
The USD gained from the
FOMC decision as the market saw it as more hawkish than expected. Overall, apart from a few tweaks, the Fed was in line with market prices. Regardless, the market responded in a big way pushing Treasury yields higher and giving the USD some relief.
The data is the most important thing now because it will decide what the Fed is going to do. They turned their focus to inflation again, so it will likely only take one soft CPI report in January to see the market react in a negative way sending Treasury yields and the US Dollar more lower
On the JPY side, the BoJ left interest rates unchanged as expected, but Governor Ueda delivered a smaller presser than expected. In fact, it really impressed him salary data to decide on the timing of the next rate hike and said the move will become clearer in March or April.
This caused the market to price in the probabilities for a walk in january and pushed back again to the next meeting scheduled for March.
USDJPY Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can see that USDJPY extended the rally into the 158.00 zone after a slightly more hawkish FOMC decision and a more dovish BoJ announcement. This was a fatal combination for the pair as the bullish trend picked up strongly.
From a risk management perspective, buyers will now have a better risk to reward position around the line of motion
although we will need weak US inflation data to push the pair that far lower.
USDJPY Technical Analysis – 4 Hour Time Frame
USDJPY 4 hours
On the 4 hour chart, we can see that the price is now testing the previous high. This is where we can expect more aggressive buyers to step in with a marked risk below the level to set up for an extension into the 160.00 handle next. On the other hand, the sellers will want to see the price break lower to start targeting the small move up around the 155.00 handle.
USDJPY Technical Analysis – 1 hour timeframe
USDJPY 1 hour
On the 1 hour chart, we can more clearly see the price responding to the 156.75 level as the buyers pile in. Not much else to add here as the buyers will be looking for a bounce and the sellers for a lower break. Watch out for the US PCE report today as it could miss a pullback in the pair. The red lines define the average daily range for today.
Catalysts to come
Todaywe finish the week with US PCE data.
