The US data continues to
surprise to the upside and as a consequence led the market to reprice interest
rates expectations on the more hawkish side as the Fed members keep on
repeating that two or more rate hikes cannot be ruled out if the data remains solid.
On the other hand, the BoJ remains stuck with its loose monetary policy causing
further weakness in the JPY. There are small hints that the BoJ may tweak the
YCC policy at the next meeting, but the central bank has been disappointing
markets for quite a long time now.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that USDJPY keeps on charging higher with almost no pullbacks. This strong
rally is led by the hawkish repricing in interest rates expectations as the US
data keeps on surprising to the upside. The breakout of the resistance at
142.17 has opened the door for a rally towards the 150.00 level as there’s no
clear strong resistance until then.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the current
rally is supported by the moving averages as the
buyers keep on leaning on them to position for further upside. In fact, now
that the price is pulling back into the red 21 moving average and the trendline, we can
expect the buyers to step in again. The sellers, on the other hand, will need
to see the price to break below the trendline to start looking for a bigger
pullback into the 142.17 resistance now turned support.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see how
cleanly the price has been printing higher highs and higher lows and that the
whole move after the breakout is diverging with
the MACD. This
is generally a sign of weakening momentum often followed by pullbacks or
reversals. So, as long as the price stays above the trendline we can expect
more upside, but a break lower would signal the pullback towards the 142.17
support. Today, we have the US
PCE report and a beat is likely to strengthen the USD leading to more upside in
USDJPY, but a miss should provide the pullback into the 142.17 support.

This article was written by FL Contributors at www.forexlive.com.

• To implement prudent monetary policy accurately and forcefully
• To effectively support domestic demand expansion, improve private consumption environment
• To ensure delivery of housing, promote healthy development of real estate market
• To keep liquidity reasonably ample, also maintain reasonable credit growth

The main message is the same, in that they are still going to do what they can to bolster support for the economy. The issue here is that so far, a lot of these measures have not really helped and with corporate profits falling and domestic demand stuttering, Beijing might have to really step up to try and get things back on track post-Covid.

This article was written by Justin Low at www.forexlive.com.

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About
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This article was written by FL Contributors at www.forexlive.com.

Headlines:

• USD/JPY knocks on the door of intervention territory
• Japan’s Matsuno says closely watching FX moves with high sense of urgency
• Eurozone June preliminary CPI +5.5 vs +5.6% y/y expected
• France June preliminary CPI +4.5% vs +4.6% y/y expected
• Germany May retail sales +0.4% vs 0.0% m/m expected
• Germany May import price index -1.4% vs -1.4% m/m expected
• UK June Nationwide house prices +0.1% vs -0.3% m/m expected
• China reportedly surveyed some foreign banks about dollar deposit rates
• RBA to raise cash rate by 25 bps to 4.35% next week – Reuters poll
• What is priced in for the RBA policy decision next week?

Markets:

• GBP leads, CAD lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields up 1.6 bps to 3.870%
• Gold down 0.1% to $1,905.63
• WTI crude down 0.1% to $69.76
• Bitcoin up 1.2% to $30,775

And just like that, we’re about to reach the halfway point for the 2023 year.

The session itself was decent as there were some economic releases to digest but nothing too impactful at the end of the day. Of note, euro area headline annual inflation dropped further in June but core annual inflation ticked a little higher. On the balance of things, that still vindicates the more hawkish posture by the ECB at least.

The euro itself is just a touch lower on the day, as the dollar is sitting more mixed across the board. EUR/USD is down 0.1% to 1.0850 with the range for the day still rather narrow.

On the dollar, the currency itself has seen plenty of pushing and pulling in the last six months. But so far this year, the dollar index itself is ending up little changed. And I would argue that speaks to the resilience of the greenback considering how many were calling for its head amid anticipation of a Fed policy pivot.

Looking to today, USD/JPY did rise to just above 145.00 in Asia but is now little changed around 144.70. Traders are having to weigh up intervention risks, so perhaps there is some element of profit-taking as well.

In the equities space, stocks are keeping some enthusiasm towards the end of the week. European indices and US futures are higher but there is still the final month-end/quarter-end stretch to deal with later. Despite last week’s setback on growth worries, equities have enjoyed a good month in June.

Have a pleasant weekend, everyone. And I’ll catch you guys again next week.

This article was written by Justin Low at www.forexlive.com.