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Let’s kick off this brand new trading month with a look at this simple range play on USD/JPY.
Can the U.S. ISM manufacturing PMI spur a bounce?
Before moving on, ICYMI, yesterday’s watchlist checked out AUD/USD’s trend pullback ahead of the U.S. core PCE price index. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. core PCE price index posted 0.4% month-over-month uptick as expected in Jan, earlier reading downgraded from 0.2% to 0.1%
U.S. personal income up 1.0% m/m versus 0.4% uptick expected, personal spending rose 0.2% as expected
Weekly initial jobless claims came in at 215K vs. estimated 209K increase and earlier 202K rise in unemployment
Chicago PMI fell from 46.0 to 44.0 in February vs. 48.1 forecast, reflecting a much faster pace of industry contraction
Pending home sales slumped 4.9% month-over-month versus projected 1.4% gain in Jan, previous reading downgraded to show 5.7% increase from initially reported 8.3% jump
FOMC member Bostic suggests that Fed easing may be appropriate in summer based on his inflation outlook
New Zealand building consents slumped 8.8% m/m in Jan vs. earlier 3.6% gain
Japanese unemployment rate unchanged at 2.4% in Jan as expected
RBNZ head Orr suggests they might begin normalizing policy by next year since inflation expectations have declined
Chinese official manufacturing PMI dipped from 49.2 to 49.1 as expected in Feb, reflecting slightly faster pace of industry contraction
Chinese official non-manufacturing PMI improved from 50.7 to 51.4 in Feb, indicating faster industry growth vs. 50.9 forecast
Chinese Caixin manufacturing PMI up from 50.8 to 50.9 vs. 50.7 forecast in Feb to signal stronger industry growth
Japanese consumer confidence index up from 38.0 to 39.1 vs. 38.4 forecast in February
Price Action News
Overlay of JPY vs. Major Currencies Chart by TradingView
The yen enjoyed some gains after BOJ official Takata spoke briefly about tightening prospects, but the currency resumed its selloff during the New York session.
This decline was extended in today’s Asian market hours, and BOJ Governor Ueda’s remarks during the G20 Summit may have been the reason for the currency’s drop.
Ueda reiterated that it’s still too early to conclude that inflation is close to sustainably meeting their 2% inflation target. He also pointed out that the April wage negotiations are crucial, as the outcome could determine how much labor cost inflation could impact overall consumer price levels.
Among its rivals, the yen is weakest against the Loonie, dollar, and Aussie, but it has managed to stay somewhat afloat against the franc.
Upcoming Potential Catalysts on the Economic Calendar:
Swiss retail sales at 7:30 am GMT
Eurozone flash headline and core CPI estimates at 10:00 am GMT
U.S. ISM manufacturing PMI at 3:00 pm GMT
U.S. UoM revised consumer sentiment index at 3:00 pm GMT
FOMC member Waller’s speech at 3:15 pm GMT
FOMC member Bostic’s speech at 3:50 pm GMT
FOMC member Daly’s speech at 6:30 pm GMT
FOMC member Kugler’s speech at 8:30 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
USD/JPY 15-min Forex Chart by TradingView
Here’s another look at the USD/JPY range that’s holding up pretty well!
Volatility picked up during the release of the U.S. core PCE price index, as the reading came in line with estimates of a 0.4% monthly uptick for January but the previous reading was taken down a notch.
After that, BOJ head Ueda also caused some waves, as he mentioned during his G20 Summit testimony that they’re not too convinced that inflation can sustainably return to target and that they’re hoping the spring wage talks might do the trick. Talk about pressure!
USD/JPY spiked below its range support around 149.70 but pulled right back up and is now setting its sights back on the resistance at 150.80.
Sustained bullish momentum could still spur a break above this and R1 (150.94) near the 151.00 major psychological handle, possibly putting the pair on track to test R2 (151.40).
On the other hand, if dollar bears return soon, the pair could slide back to the range bottom just below S1 (149.86).
The upcoming ISM manufacturing PMI might determine where dollar pairs are headed before the end of the week, as analysts are counting on an improvement from 49.1 to 49.5. A return to industry growth might convince dollar bulls to charge strongly.
Don’t forget to keep your ears peeled for policy comments from the FOMC members’ speeches, too!
