FED: Powell Says Current Policy is Probably Modestly Restrictive
- On the shifts in the SEP's inflation forecasts:
- "We've learned that tariffs are going to be substantially larger than forecasters generally thought... what we learned, and particularly in April, was that substantially larger tariffs were coming and that would mean higher inflation. That's what happened. You saw 2.5% forecast in December. You say 2.8% in March and 3.1% now, six tenths higher for 2025. That's a big part of the change. And that's due to the effects of the tariffs. We don't know where they're going to land. But it's pretty apparent they're going to land higher than outside forecasters were guessing at the end of last year."
- Powell says of the current policy stance: "Policy is modestly or moderately, probably modestly restrictive. If you look at the economy it's not performing as though it were performing under very strict monetary policy, very restrictive. I would say modestly restrictive."
- Again he sounds patient on rate cuts given incoming data: "I think we can take the time to do [make a judgment] because unemployment is 4.2%. Wages are moving up. Real wages are moving up at a healthy clip now. And inflation is 2.3% headline [] over a 12-month basis. So it's a good economy and a solid economy with decent growth."
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EURJPY TECHS: Monitoring Support At The 50-Day EMA
- RES 4: 166.69 High Oct 31 2024 and a key resistance
- RES 3: 166.10 High Nov 6
- RES 2: 165.21/43 High May 13 / High Nov 8 2024
- RES 1: 164.07 High May 15
- PRICE: 163.05 @ 16:40 GMT May 19
- SUP 1: 162.23/15 50-day EMA / Intraday low
- SUP 2: 161.60 Low May 6
- SUP 3: 160.99 Low Apr 22
- SUP 4: 159.48 Low Apr 9
EURJPY maintains a bearish tone following the pullback from its recent high. The move down is for now, considered corrective. However, the cross is testing a key support at 162.23, the 50-day EMA. A break of this level would undermine a bearish theme and signal scope for a deeper retracement. For bulls, a resumption of gains would refocus attention on key resistance and the bull trigger at 165.21, the May 13 high.
US INFLATION: Manheim Used Vehicle Index Down M/M, Potential CPI Pullback Ahead
Manheim Auctions's gauge of US used vehicle prices fell by the most in 13 months at-1.1% in May (after +2.8% the prior month), more or less returning the index level to where it was at the start of the year.
- On an individual month-to-month percentage change basis the series hasn't corresponded particularly well with CPI used vehicles, with Manheim instead working with a very rough 2-month lead. The last two months, used vehicle prices in CPI have dropped 0.5% M/M and 0.7% M/M.
- Manheim points to a potential uptick in May/June CPI before pulling back, but it's unknown how much of the price effect is tariff- and tariff-front-running related.
USDJPY TECHS: Testing Support At The 20-Day EMA
- RES 4: 150.49 High Apr 2
- RES 3: 149.28 High Apr 3
- RES 2: 148.54/65 76.4% of Mar 28 - Apr 22 bear leg / High May 12
- RES 1: 146.29 50-day EMA
- PRICE: 144.89 @ 16:39 BST May 19
- SUP 1: 144.67/143.45 Low May 19 / Low May 8
- SUP 2: 142.36 Low May 6
- SUP 3: 141.97 Low Apr 29
- SUP 4: 139.89 Low Apr 22 and a bear trigger
USDJPY continues to trade below the May 12 high and the pair maintains a softer tone. The latest pullback underpins the view that gains since Apr 22 appear corrective. A stronger reversal lower would refocus attention on 142.36, the May 6 low. First support to watch is 145.21, the 20-day EMA. It has been pierced, a clear break would strengthen a bearish theme. Key short-term resistance has been defined at 148.65, the May 12 high.
