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USD/JPY has now pulled back about half of its upswing from the U.S. CPI report.
Can USD bears keep shorting USD/JPY while Uncle Sam drops a couple of mid-tier economic reports?
Before moving on, ICYMI, yesterday’s watchlist looked at GBP/JPY’s short-term uptrend after the U.K.’s January CPI release. 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:
BOE Gov. Bailey was unfazed by latest CPI data: “We slightly overshot last month and slightly undershot this month” which “pretty much leaves us where we were.”
EIA: U.S. crude oil inventories rose by 12.0 million barrels in the week to Feb 9, higher than the expected 2.6 million-barrel build and previous 5.5 million barrel increase
ECB member Joachim Nagel suggested that it’s “more painful” if you loosen monetary policy too soon than too late, and that “numbers are going in the right direction” but that they are “not where we want to be.”
In a speech on Wednesday, FOMC voting member Michael Barr said he supports Powell’s “careful approach,” saying that “We need to see continued good data before we can begin the process of reducing the federal funds rate”
In a testimony, RBA Gov. Bullock defended their tight policies, saying that “Inflation is being persistent” but is expected to “reach intended levels in late 2025”
New Zealand’s visitor arrivals dipped by 2.2% m/m in December after 1.6% decline in November
Japan’s GDP unexpectedly slipped into a technical recession after a 0.1% q/q GDP decline in Q4 followed a 0.7% drop in Q3; Price index slowed from 5.3% y/y to 3.8% y/y; Japan loses world’s 3rd largest economy rank to Germany
Bitcoin market cap surpasses $1 trillion mark as BTC/USD hits $52,000 on ETF flows
Melbourne Institute: Australia’s expected inflation rate unchanged at 4.5% y/y for a third consecutive month in February
Australia gained a net of 0.5K jobs in January (26.4K expected, -62.7K previous) with full-time jobs rising by 11.1K while part-time employment fell by 10.6K; the Unemployment rate climbed from 3.9% to 4.1% in January
Japan’s final industrial production revised from 1.8% m/m to 1.4% m/m in December
Switzerland’s PPI for January: -0.5% m/m (-0.2% expected, -0.6% previous)
The U.K. is technically in a recession with a -0.3% q/q preliminary GDP in Q4 after a -0.1% q/q reading in Q3. Monthly GDP is down by 0.1% (-0.2% expected, 0.2% previous)
Price Action News
Overlay of GBP vs. Major Currencies Chart by TradingView
We saw decent intraday moves from the Japanese yen, euro, and the commodity-related currencies today but the British pound is probably one of the biggest movers in the Asia and early European session.
A report printed earlier today showed the U.K. slipping into a technical recession after the economy dropped by 0.3% q/q in Q4 following a 0.1% decline in Q3. That’s after the U.K.’s inflation misses!
Slower growth and inflation increased the odds of a Bank of England (BOE) interest rate cut and weighed on the British pound.
GBP is in the red against its major counterparts with the biggest losses seen against JPY and CHF while the least losses are seen against AUD, NZD, and USD.
Upcoming Potential Catalysts on the Economic Calendar:
Euro Area trade balance at 10:00 am GMT
Canada’s housing starts at 1:15 pm GMT
Canada’s manufacturing sales at 1:30 pm GMT
U.S. retail sales reports at 1:30 pm GMT
U.S. NY manufacturing index at 1:30 pm GMT
U.S. initial jobless claims at 1:30 pm GMT
U.S. Philly Fed manufacturing index at 1:30 pm GMT
U.S. industrial production and capacity utilization at 2:15 pm GMT
U.S. NAHB housing market index at 3:00 pm GMT
FOMC member Christopher Waller to give a speech at 6:15 pm GMT
RBNZ Gov. Orr to give a speech at 6:40 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
USD/JPY is fast approaching a short-term trend line support that’s been around all week!
As you can see in the forex calendar, the U.S. will publish a bunch of mid-tier economic reports that may influence USD demand. The retail sales data, in particular, is expected to show slower growth.
But Japan slipping into a technical recession also decreased the odds of the Bank of Japan (BOJ) exiting its negative interest rate policies so USD may have a half a chance against JPY.
Can the U.S. dollar maintain its intraweek uptrend against the Japanese yen?
We’re keeping close tabs on the trend line support near the S2 (150.11) Pivot Point line and 50% Fibonacci retracement level. See, aside from USD/JPY trading near the support zone, it’s also sporting a potential bullish divergence in the 15-minute time frame.
Bullish candlesticks accompanied by U.S. reports that point to the Fed delaying its first interest rate cut can boost USD and put USD/JPY back to its uptrend.
In this case, USD/JPY may draw in enough buyers to revisit the 150.55 Pivot Point line or 150.80 previous highs.
What do you think? Will USD/JPY extend its intraweek uptrend this week? Or will we see enough bearish candlesticks to drag the pair to lower inflection points instead?
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