Last
week, the US CPI came
basically in line with expectations, but the good news is that the Core M/M
reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked
higher, but Continuing Claims remained solid. We have already seen Claims
spiking higher in the past months, so it shouldn’t be worrying yet. The
long-term inflation expectations in the University of Michigan report
ticked lower, so on the data side the soft-landing narrative was supported. The
US Dollar, appreciated across the board as the attention may have turned
already on the next data given the higher energy prices and China starting to stimulate more.

On the other hand, 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%. So, 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.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that USDJPY broke above the last high at 145.00. This is a key level as the BoJ
in the past intervened once USDJPY rose to such highs. In fact, the
145.00-150.00 window is seen as the intervention range, so the buyers may start
to get more cautious from now on.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the buyers
keep leaning on the trendline. A break
below this trendline should see the sellers piling in to target the 142.00
handle. We can also see that we have a divergence with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, if the price bounces on the trendline it will be
counted as a pullback, but a break below it, would open the door for a reversal
into the 142.00 handle.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a strong support zone at the 145.00 level as there also confluence with
the 38.2% Fibonacci
retracement level and the trendline. This is where
the buyers should step in with a defined risk below the zone and target a new
higher high. The sellers, on the other hand, will want to see the price
breaking lower to pile in and target the 142.00 handle.

Upcoming Events

This week is a
bit empty on the calendar front but we will still see a couple of top tier
economic data. Today, we have the US Retail Sales report and strong data should
support the USD, while weak data is likely to weigh on the greenback. On
Thursday, we will see the latest US Jobless Claims report where a big miss is
likely to trigger recessionary fears and send the USDJPY lower. On the other hand,
a beat should keep supporting the soft-landing narrative and keep the bids in
USDJPY coming. Finally, on Friday, we will have the Japan CPI report where a
beat may strengthen the JPY as the market would expect the BoJ to let yields to
rise a bit more without intervening. On the other hand, a miss should weigh on
the JPY.