USD/JPY closes back above its 200-day average ahead of BOJ meeting: Asian Open

Market Summary:

• Apple shares were down -0.85% after the company announced it would pause sales of its Series 9 and Ultra 2 smartwatches in the US, due to a patent dispute with Masimo
• Regardless, the Nasdaq 100 printed a fresh closing record high – although it remains a touch beneath the all-time high of 16,764.86.
• The Dow Jones also printed an intraday record high but pulled back to close the day slightly lower.
• The S&P 500 remains the odd one out and 78 points beneath its own all-time high
• WTI crude oil extended its countertrend move and briefly traded above $74 on Monday. I noted in yesterday’s COT report and on Twitter (sorry… X) that that crude oil is at or near an important inflection point
• Gold held above Friday's low in what appeared to be technical repositioning, during low liquidity trade. Although gold was dented on Friday as comments from Fed members Bostic and Williams pushed the 'higher for longer' rates narrative.
• PCE inflation is hands down the big event for the week, and traders will want to see a soft set of numbers to justify hopes that that Fed could cut by at least 75bp this year. As PCE inflation is not a volatile data set, there may be some disappointment if they don't come in soft enough.

Events in focus (AEDT):

There has been some excitement that the BOJ may be close to exiting negative rates. This has led to some speculation that the BOJ could do just that today. But if history is anything to go by, they’ll likely drag their ultra-dovish policies into the new year. And that could help USD/JPY further extend its countertrend move if no action is taken today. Of course, should they hike their interest rate to 0% or higher, USD/JPY could break to new cycle lows.

The RBA also release their monetary policy minutes. I’m intrigued to see if they are as hawkish as the prior two minutes were – as they reversed the apparent dovishness the statement provided.

• 11:00 – New Zealand business confidence (ANZ)
• 11:30 – RBA minutes
• 13:30 – BOJ monetary policy statement
• 14:00 – BOJ interest rate decision
• 17:30 – BOJ press conference
• 21:00 – European CPI

ASX 200 at a glance:

• The ASX 200 snapped a 6-day winning streak with a small bearish inside day on Monday
• The strong rally has stalled beneath the double top pattern around 7472.3 (July highs)
• I’d like to see a pullback before considering longs beneath this key resistance level
• 7400 is a likely support level, a break beneath which could see the 7362 / 7341 highs act as support

USD/JPY technical analysis (daily chart):

USD/JPY has fallen over 7% from its November high, but I now see the potential for a countertrend move. Prices closed back above the 200-day average on Monday and formed a 3-bar bullish reversal (Morning Star).  And despite intraday breaks lower, USD/JPY has closed back above the 141.71 close low. I’m not looking for a particularly large move and suspect bears may be tempted to fade into any move towards 145. But for now, bulls could consider entries around the 200-day average / yesterday’s high to target 144 or the 144.72 low. Or bears could wait for signs of a swing high beneath 146.59.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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