US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• The US economic data keeps on surprising to the
  upside, but inflation expectations and CPI readings continue to show
  disinflation with the last two Core CPI M/M figures
  coming in at 0.16%.
• At the moment, the market doesn’t expect another
  hike from the Fed, but the next NFP and CPI data will be crucial to confirm or
  change this view.

Japan:

• The BoJ kept everything unchanged as expected but implicitly tweaked
  the YCC policy keeping the target band unchanged but giving more flexibility
  with a hard cap at 1.00%.
• They basically widened the YCC band
  without stating it explicitly.
• This has created lots of volatility
  in the JPY, but eventually led to a fast depreciation.
• The BoJ has also already intervened
  twice to smooth the rise in yields ultimately weighing on the JPY.
• Last week, the Japanese CPI data surprised to the upside with
  the core-core reading reaching again the previous high.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that from the double bottom at the
138.00 handle created after the BoJ policy meeting, USDJPY just kept on rising
with just one notable pullback. The pair recently broke above the previous high
at the 145.00 handle, but it’s struggling to keep with its rally as the market
may be awaiting new catalysts. It’s also worth reminding that the 145.00-150.00
range is considered the “intervention territory” as the BoJ last year
intervened more than once around these levels.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4
hour chart, we can see that the price has been diverging with the
MACD for a
while and this is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, the 145.00 support will be
key to determine if we will get just a pullback or a reversal.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
now have a range between the 145.00 support and the 146.50 resistance. If the
price falls back to the support, we can expect the buyers to pile in with a
defined risk below the level and target new highs. The sellers, on the other
hand, will want to see the price breaking below the support to pile in and
extend the fall into new lows with the 142.00 handle being the first target.

Upcoming Events

This week is
pretty empty on the economic data side as we will only have the PMIs tomorrow
and the US Jobless Claims on Thursday. Given the strong appreciation in the US
Dollar seen in the past weeks, we can expect some USD weakness if the data
misses expectations, and we will likely need much stronger than expected
readings to see another sustained rally in the greenback. Remember also that
this is the Jackson Hole Symposium week, so we will hear from many central
bankers including Fed Chair Powell, who is set to speak on Friday.

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

• Dollar eases lower in European morning trade
• USD/JPY down on the day but keep a close eye on the bond market
• Yuan fallout still being somewhat contained by Beijing for now
• BOJ’s Ueda says did not discuss FX volatility in meeting with Kishida
• Eurozone June current account balance €35.8 billion vs €9.1 billion prior
• UK August CBI trends total orders -15 vs -9 prior
• Switzerland July trade balance CHF 3.13 billion vs CHF 4.82 billion prior

Markets:

• NZD leads, EUR lags on the day
• European equities higher; S&P 500 futures up 0.5%
• US 10-year yields down 2.6 bps to 4.316%
• Gold up 0.4% to $1,900.91
• WTI crude down 0.4% to $80.40
• Bitcoin down 0.3% to $26,034

It was a fairly mixed session as markets remain slightly on the quiet side in Europe once again today.

The dollar nudged slightly lower as equities sentiment picked up once again, with tech shares leading the way after yesterday’s solid start to the week. US futures were flattish early on but are now seen higher with S&P 500 futures up 0.5% and Nasdaq futures up 0.7%. European indices has some catching up to do to yesterday, and so are posting gains of roughly 1% across the board.

EUR/USD raced up to a high of 1.0930 but sellers are holding on the 100-day moving average at that key level, before falling back to 1.0885 now. USD/JPY is keeping lower at around 145.70 levels from around 146.00 earlier as slightly lower bond yields are also weighing.

The lower yields in long-term Treasuries today is making for a bit more of a mixed mood early on but just be mindful that the bond market tends to take on a life of its own in US trading.

Despite the yuan’s softness (even with efforts by China to defend the currency), the aussie and kiwi are able to brush that aside temporarily. AUD/USD is up 0.5% to 0.6445 and NZD/USD up 0.6% to 0.5960 on the day.

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

The flash estimates for the August PMI readings in the euro area will be due tomorrow. And another set of relatively poor data could yet prove to be a drag for the euro in the days/weeks to come. The manufacturing sector is already well in recession and a slowing services sector as well is threatening to cause stagnant growth in the region during Q3.

While the ECB is still largely focused on the inflation mandate, policymakers cannot ignore economic developments as well. That especially as the Eurozone looks to be staring at a credit crunch right in the face.

For now, traders are pricing in roughly 68% odds of a 25 bps rate hike by the ECB for next month. The data tomorrow will likely have some impact on that one way or another. But markets will also stay guarded ahead of Lagarde’s appearance in Jackson Hole and more importantly, the inflation numbers that will come next week.

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