PCE Data Unleashed: Anticipating the USD/JPY Reaction

<p>U.S.
Economic Data Reaction: The USD/JPY pair's response to U.S. GDP and
jobless claims data has showcased the currency's sensitivity to American
economic health indicators.</p><p>Central Bank
Speculations: Futures markets are reflecting a near 50% chance of a
March Fed rate cut, while BoJ rate hike expectations for April hover around 70%.</p><p>Technical
Consolidation: The <a href="https://fxgt.com/forex/" target="_blank" rel="follow">USD/JPY</a> has
entered a consolidation phase, evidenced by its recent break outside of the
4-hour uptrend channel, signalling a potential reassessment of bullish
momentum.</p><p>Economic
Drivers:</p><p>Mixed
Responses to U.S. Data: The initial rise in USD/JPY following above-forecast
U.S. GDP figures was tempered by an unexpected increase in jobless claims,
highlighting the pair's sensitivity to fluctuating U.S. <a href="https://fxgt.com/economic-calendar/" target="_blank" rel="follow">economic indicators</a>.</p><p>Tokyo CPI
Inflation Slows: January saw a year-on-year increase of 1.6%, a decrease from
the previous month's 2.7%, marking the lowest inflation rate since March 2022.</p><p>Interest
Rate Dynamics: The speculation around Federal Reserve and Bank of Japan rate
decisions remains a pivotal factor, with the market's expectations adapting to
the latest economic data and central bank communications.</p><p>Bank of
Japan's Policy: The BOJ's recent stance, maintaining short-term rates at -0.1%
and the 10-year bond yield around 0.0%, has reinforced the ultra-loose monetary
environment in Japan.</p><p>BoJ's
Monetary Policy Stance: Remarks by BoJ Governor Ueda suggest an optimistic yet
cautious approach towards achieving Japan's 2% inflation target, potentially
indicating a gradual shift in the country's monetary policy.</p><p>Technical
Overview and Key Levels</p><p>Ongoing
Bullish Trend: Despite the recent consolidation phase, the USD/JPY maintains
its bullish momentum, supported by a 4.90% increase since the year's start and it’s
positioning above key moving averages across weekly, daily, and 4-hour
timeframes.</p><p>RSI Near
Overbought Territory: The daily RSI levels for USD/JPY are neutral but nearing
overbought conditions, suggesting the need for caution among traders if the
uptrend persists.</p><p>Support and
Resistance: Key support is found at the week's low of ¥146.70, coinciding with
the 45-daily EMA channel, while resistance is outlined at January's high of ¥148.80,
with ¥148 acting as an immediate barrier for further upward movement. </p><p>Trend
Analysis: The overall bullish trend suggests a potential challenge of the ¥150.00
psychological resistance should the pair surpass the ¥148.80 threshold. </p><p>Critical
Support: A breach below the key support level of ¥146.70 could signal a shift
to bearish momentum, undermining the strength of the ongoing uptrend.</p><p>USDJPY 4Hour
Chart </p><p>Looking
Ahead</p><p>Fed and BoJ
Rate Decisions: Futures indicate a 50% chance of a Fed rate cut in March, down
from 100% at the year's start. Probability of an April BoJ rate hike remains
around 70% since the BoJ meeting.</p><p>During this
consolidation phase in the market, upcoming economic indicators and central
bank decisions are set to influence the short-to-medium-term movements of the <a href="https://fxgt.com/popular/" target="_blank" rel="follow">currency pair.</a> Key data releases, such as
today's U.S. core PCE and Tuesday's JOLTS report, will significantly impact the
market's direction in the lead-up to the Fed meeting on Wednesday.</p><p>Today's PCE
Price Index announcement is pivotal for the USD/JPY pair, as it influences
Federal Reserve monetary policies. A higher-than-expected PCE figure could
boost the USD by reinforcing prospects of sustained or heightened Fed rates,
lifting USD/JPY above short-term resistance at ¥148 towards the critical ¥148.80
level. </p><p>Conversely,
a lower-than-anticipated PCE result might suggest easing inflationary
pressures, potentially softening the USD as markets speculate on a more dovish
Fed stance, thereby pressuring USD/JPY downwards towards a retest of ¥146.70. <a href="https://fxgt.com/register/" target="_blank" rel="follow">Traders</a> should brace for potential
volatility post-announcement, adjusting strategies based on the PCE data's
implications for future interest rate trajectories and overall economic
outlook.</p>

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