FX TALKING POINTS:
- USD/JPY Rebound Sputters, Bearish Formation Starts Taking Shape Despite Hawkish Fed Rhetoric. Broader Shift in Dollar-Yen[1] Behavior to Persist.
- NZD/USD[2] Struggles to Test February High (0.7437) Ahead of New Zealand 1Q Consumer Price Index (CPI). 2018 Range on the Radar.
USD/JPY REBOUND SPUTTERS, BEARISH FORMATION STARTS TAKING SHAPE DESPITE HAWKISH FED RHETORIC. BROADER SHIFT IN DOLLAR-YEN BEHAVIOR TO PERSIST.
The recent rebound in USD/JPY quickly sputters even as Federal Reserve officials strike a hawkish outlook for monetary policy, and the pair may continue to give back the advance from the 2018-low (104.63) as it carves a fresh series of lower highs and lows.
Incoming New York Fed President John Williams floated the idea of extending the hiking-cycle as the 2018-voting member on the Federal Open Market Committee (FOMC) warns that ‘it would not be too surprising in that situation to have interest rates somewhat above the long-run neutral rate,’ but market participants remain unconvinced, with Fed Fund Futures still projecting the benchmark interest rate to end the year around the 2.00% to 2.25% threshold.
As a result, market participants may pay increased attention to the Bank of Japan (BoJ) as the central bank starts to gradually alter the outlook for monetary policy, and the broader shift in USD/JPY behavior may continue to unfold over the coming months as Governor Haruhiko Kuroda and Co. appear to be on course to conclude the easing-cycle in fiscal-year 2019.
With that said, a bear-flag formation appears to be unfolding as USD/JPY snaps the upward trending channel from the previous month, and the dollar-yen exchange rate may target fresh yearly low ahead of the
