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Muted Reaction to Minutes

The June FOMC minutes yesterday were broadly USD positive but offered little in the way of new information and, as such, saw a relatively muted market reaction. The minutes confirmed that the majority of members agreed that further tightening would likely be necessary despite the decision to hold rates unchanged in June. That decision was based on concerns around the economy and the lagged impact that previous tightening was having, posing the need for a period of assessment.
 

Firm Consensus Around Further Hikes

However, looking ahead, nearly all members were seen in favour of further tightening, though at a slower pace than the rapid tightening which had been seen over the previous 10 consecutive meetings. In terms of specifics, 16 of the 18 policymakers favoured at least one further hike this year with 12 favouring a further two hikes.
 

US Jobs Data Next

Pricing for the July meeting increased on the back of the minutes, rising to over 90%. The minutes reaffirmed the Fed’s data-dependent view and, as such, the focus now turns to the upcoming US jobs data tomorrow which, if strong, should solidify July rate hike expectations further. USD has seen a muted response so far as traders remain cautious ahead of tomorrow’s data.
 

Technical Views

USDJPY

(Click on image to enlarge)

The market has pulled back further from the 145 level today with the pair now retesting the top of the broken bull channel. If we move back inside the structure, focus will be on local support at the 142.21 level. If broken, risks grow for a deeper correction towards the 138.03 level next, in line with bearish momentum studies readings. 

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