USD/JPY Consolidates its Losses at Key Tech Levels
USD/JPY Analysis
Last week's soft CPI inflation report sparked a dovish repricing in market expectations around the Fed's rate hike cycle. The central bank had previously hinted at a slower pace of tightening at some point, but is far from a pause. However, the next decision is a month away and officials will have the chance to assess two more inflation reports and a jobs report until then.
Recent Fed commentary shows some division among policy makers as to the next steps, but most seem to be contemplating smaller increases ahead, after a series of 75 basis points moves. Governor Waller (voter) said that recent data have made him "more comfortable" to consider a 50 bps adjustment, but expects hikes to continue in 2023. [1]
Ms George who is a voter this year but not in the next one, appeared more hawkish in her Wall Street Journal remarks, warning that officials must be careful "not to stop too soon". [2]
USD/JPY breached the lower border of the daily Ichimoku Cloud on Tuesday and remains in a perilous state, after its worst week in twenty-four years. The aggressive slump from last month's multi-decades high has exposed it to the 200Days EMA at around (135.47-134.60), but fresh catalyst will be required for a breach that would bring 130.38 in the spotlight.
However, the pair finds support this week and the Bank of Japan remains committed to its ultra-loose monetary tightening, in stark contrast with the Fed and its major counterparts. As such, we can see a bounce back above 141.16, but USD/JPY does not seem ready yet to move past the strong resistance area of 144.40-90.
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. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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