During the London session, S&P500 futures are subdued, extending the weekend due to the Presidents’ Day holiday in US markets. Concurrently.
10-year US Treasury yields have rebounded to 4.31%, driven by the hotter-than-anticipated Producer Price Index and consumer price inflation data for January.
Although investors have scaled back expectations of rate cuts in the upcoming May monetary policy meeting by the Federal Reserve, policymakers view the unexpectedly higher data as a temporary anomaly that should not be overemphasized. The focus should primarily be on the broader declining trend in inflation.
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Looking ahead, market participants will closely monitor the release of the Federal Reserve Open Market Committee minutes for the January policy meeting scheduled for Wednesday. These minutes will offer detailed insights into the rationale behind maintaining the status quo and provide a fresh perspective on interest rates.
Meanwhile, the Japanese Yen has found support against the US Dollar, despite investors tempering expectations for the unwinding of the Bank of Japan’s expansionary monetary policy stance. With the Japanese economy experiencing a technical recession, BoJ policymakers are likely to persist with plans to expand stimulus measures to bolster economic growth.
Conversely, Federal Reserve Chair Jerome Powell has pushed back against the anticipation of interest rate reductions, with investors now eyeing the possibility of the first 25 basis points rate cut in 2024, potentially as early as June. Insights into further monetary policy adjustments may be gleaned from the FOMC Minutes scheduled for release on Wednesday, particularly in light of recent indications of persistent inflationary pressures.
Looking ahead, Japan’s Trade Balance figures are expected on Wednesday, preceding the release of the FOMC Meeting Minutes. Additionally, traders will closely monitor speeches by Fed officials Bostic and Bowman. On Thursday, the preliminary Japanese Jibun Bank PMI for February will be made available, adding further context to market movements.
USD/JPY has been moving in a bullish market structure forming higher highs and higher lows. As you can see from the chart attached below, it tried to cross below the 200 Day Moving Average but turns out it was a fake breakout and now it is heading towards the key resistance level.
It is too late to enter long position now as the price is very high up. I will remain patient and monitor if there’s a retracement for long entries or if there’s not then I will wait for a clear breakout of the resistance to look for long entries.
