Fundamental Analysis

• U.S. CPI Falls Below Market Expectations, Up 3.3% Year Over Year
• FOMC Dot Plot Forecasts Only One Rate Cut in 2024
• USDJPY Briefly Hits 155 JPY, Then Rises to Upper 156 JPY Range

USDJPY technical analysis

The U.S. Consumer Price Index (CPI) fell short of market expectations, increasing speculation about rate cuts, leading to a decline in USDJPY. Consequently, the pair hit a low of 155.70 JPY, a key support level. Meanwhile, U.S. stock indices reached all-time highs. Although the Dow Jones Industrial Average lagged, the Nasdaq continued its upward trend.

The FOMC dot plot indicated a reduction in expected rate cuts for 2024 from three to one, suggesting continued monetary tightening. Despite two consecutive months of slowing inflation, the hawkish tone resulted in fewer anticipated rate cuts.

Subsequently, USDJPY saw a buyback movement, rising to the upper 156 JPY range. Currently, the 100% Fibonacci expansion line serves as significant resistance.

Tomorrow’s Bank of Japan (BOJ) monetary policy meeting is expected to maintain the current policy, creating a favorable environment for USDJPY to rise.

Day trading strategy (1 hour)

Analyzing the 1-hour chart of USDJPY, the U.S. employment report released last Friday showed a significant increase in new jobs, causing USDJPY to surge from the 155 JPY range to the 157 JPY range. However, the subsequent U.S. CPI report indicated two consecutive months of slowing inflation, resulting in a sharp drop from the 157 JPY range to the 155 JPY range.

The FOMC dot plot revised the expected rate cuts for this year from three to one, causing USDJPY to rally again from the 155 JPY range to the upper 156 JPY range. Currently, the USDJPY is oscillating between 155 JPY and 157 JPY.

Tomorrow’s BOJ policy meeting is not expected to bring policy changes. Market attention is focused on the BOJ Governor’s press conference, which could influence USDJPY’s direction. Given Governor Ueda’s previous cautious stance on rate hikes, a dovish tone is likely, potentially leading to a rise in USDJPY.

Attention remains on the recent high of 157.70 JPY. Whether USDJPY can break above this level is crucial for determining its future direction.

Support/Resistance lines

The support and resistance lines to consider going forward are as follows:

155.70 JPY – Recent Low

Market Sentiment

USDJPY Sell: 65% Buy: 35%

Featured Currency Pair of the Week (GBPNZD)

The British Pound to New Zealand Dollar (GBPNZD) has broken its uptrend. Although it is difficult to make a clear judgment given the weekly trend line, the pair is leaning towards a downward direction. The flat result of the UK GDP is a headwind for the current government, accelerating the sell-off of the Pound.

Attention should be paid to whether the weekly close breaks the uptrend line. If it is confirmed that the uptrend line acts as a resistance next week, a significant decline could be expected, making it a point of interest for swing traders.

Today’s important economic indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.