USD/JPY Rebounds, Eyeing Key Tech Levels
USD/JPY Analysis
Over the weekend, First Citizens Bank agreed to assume about $72 billion of Silicon Valley Bank's assets, whose failure had sparked the recent market turmoil, at a discount of $16.5 billion [1]. Furthermore, authorities continued to provide reassurances around the health of the banking system, which remains "sound and resilient" according to readout of Friday's Financial Stability Oversight Council Meeting. [2]
Meanwhile, Friday's data showed that CPI inflation excluding fresh food, decelerated sharply in Japan in February, at +3.3% y/y. This was smallest increase since September, after having risen up to 4.2% in the prior month, which was the highest since 1981. This would likely give the Bank of Japan the room to maintain its ultra-loose monetary policies, but the next decision is still a month out and will be delivered under a new governor.
The above factors help USD/JPY rebound from this month's slump and break above 23.6% Fibonacci. This gives it the opportunity to challenge the 38.2% level and the EMA200 at around 132.79-133.15, although a catalyst will be required for daily closes above, which would bring 134.74 in its eyesight.
USD/JPY pauses its four week-slump, but the Fed's dovish shift last week [3] due to fallout from the SVB collapse, may contain the USDOLLAR. Officials project just one more 0.25% rate hike before pausing, with markets being even more dovish. At the time of writing, CME's FedWatch Tool assigns the highest probability to rates having peaked at the current 5.00% and dropping to 4.5% by the end of the year. [4]
Below the EMA200 bias is on the downside and there is risk for lower lows, although 127.21 seems distant at this stage. The first test for the Fed's conservative approach will come on Friday, with the PCE inflation update, which could determine the pair's trajectory.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 29 Mar 2023 https://www.fdic.gov/news/press-releases/2023/pr23023.html | |
| Retrieved 29 Mar 2023 https://home.treasury.gov/news/press-releases/jy1367 | |
| Retrieved 29 Mar 2023 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20230322.htm | |
| Retrieved 28 Nov 2023 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html |
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.