USDJPY TECHS: Corrective Cycle Extends

• Statement surprises including downside risks to employment rising and the shift in the balance of risks suitably weigh on the US dollar, bolstering the underlying trend of greenback weakness this week. Price action sees the USD index break the aforementioned cycle lows, which places the DXY at the lowest point since February 2022.
• USDJPY sharply through those 146.21 lows and the bear trigger, to reach a low print of 145.49, significantly narrowing the gap to the next chart point of 145.40 (50% retracement of the Apr - Aug upleg). Should downside momentum continue, support is scant until 142.68, the July 01 low.
• EURUSD has risen to a high of 1.1919 and the immediate focus is on 1.1923, the 2.00 proj of the Feb 28 - Mar 18 - 247 price swing, while GBPUSD briefly surges above 1.37 and outperforms on the session.
• Cycle highs for cable reside at 1.3789, the July 1 and key resistance which could provide a significant level given the upcoming FOMC press conference and tomorrow’s Bank of England MPC meeting.
• AUD and NZD relatively underperform on the session following the sharp two-way swings for major equity benchmarks. AUDUSD did rise to a fresh 11-month high of 0.6707.

Looking at the updated macroeconomic forecasts:

• Inflation is seen as a little more stubborn than had been expected in the prior set of projections, with the 2026 medians upped 0.2pp each.
• That pairs with upgrades to growth across the forecast horizon, with the unemployment actually seen as lower than had been previously expected.
• The central tendency of forecasts also shows higher projected growth with lower joblessness and a higher low-end to inflation.
• These are not major changes but we would expect Chair Powell to have to address the seeming incongruence of this with the decision to cut rates at this meeting, as - while they are not central Committee forecasts, per se - the projections appear to suggest that loosening policy restriction leads to stronger growth and higher inflation.
• The longer-run projections were unchanged.

• 

Below is a comparison of the September FOMC "dot plot" of participants' projections of end-year Fed funds rates, vs the last edition in June:

• The median shifts lower are not really a surprise (3.6% from 3.9% in 2025, 3.4% from 3.6% in 2026, then 3.1% further out and 3.0% longer-run).
• The lowest dot almost certainly belongs to the new Governor Miran who pencilled in a 2.9% dot for end-2025 and presumably sees the lowest in 2027 (2.4%) before coming back up toward neutral in 2028.
• To be sure the 2025 and to a lesser extent 2026 Dot medians were reasonably close calls though with definite shifts lower. There were 9 dots at 3.9% or above for this year and 10 at 3.6% or below, making the latter the 2025 median. We presume that includes the leadership of the Committee including Chair Powell. But interesting that one saw no cuts this year (and it wasn't a voting dissenter) and 6 see this as the last reduction. That's not much changed from the total 9 who saw zero or 1 cuts in the June Dot Plot.
• For 2026 the highest dot has shifted lower by 25bp to 3.9%, but again it's a fairly split median.8 members are at 3.6% or higher (was 10 previously), with 11 at 3.4% or below (vs 9 prior). The mean of the distribution drops lower though with 5 seeing rates at 2.9% or below, vs 2 last time. That's indicative of envisaging more back-loaded cutting.
• As for further out, the 2027-2028 medians are at roughly neutral as expected, 3.1% (2028 was newly introduced in this round of projections).
• There was an interesting shift in the longer-run dots: while the median remains 3.00%, the number above 3.4% has fallen from 6 to 4, while those at 2.50% have shifted up. There are 10 members at 3.00% or below, vs 11 last time - getting a little closer to raising the median. Some of this may be related to the changes in personnel since the June meeting (Philly's Paulson for Harker, Miran for Kugler).