USD/JPY Technical Snapshot: Key Drivers Right Now

Fed cut bets wobble as core PCE holds at 2.9%; oil capex and CME outage deepen cross-asset jitters

A stickier-than-hoped core PCE inflation read at 2.9% keeps the Federal Reserve off its 2% target, complicating rate-cut hopes even as policymakers weigh a softer labor market. Cross-asset moves are being shaped by energy capex signals from Chevron, a rare 10-hour CME outage, and sharp swings in crypto-linked equities—factors that could sway the dollar, yields and global risk appetite in the days ahead.

Macro pulse: inflation sticky, labor in focus

The latest core PCE—Washington’s favored inflation gauge—landed at 2.9%, reinforcing a slow grind lower but still above the Fed’s target. Traders are debating whether the central bank can justify cutting rates while core inflation hovers near 3%, with officials increasingly attentive to the jobs backdrop. In FX, that mix tends to keep the dollar sensitive to front-end rate expectations while term premia and the long end of the Treasury curve remain hostage to policy credibility and fiscal optics.

Fed chair chatter: credibility premium at stake

Wall Street insiders are warning that picking Kevin Hassett as the next Fed chair could unsettle the institution and lift long-term yields by denting policy credibility. Alternative names circulating include Kevin Warsh and Christopher Waller. For markets, the choice matters: a chair perceived as less orthodox could widen term premia, steepen the curve and support the dollar via higher real yields, even if growth risks persist.

Energy capex: Chevron’s 2026 playbook

Chevron set its 2026 capital spending at $18–19 billion, the low end of guidance. Of that, $17 billion targets upstream, emphasizing U.S. shale and Guyana assets acquired through the Hess tie-up. Offshore will account for $7 billion, while downstream capex is seen dipping to roughly $1 billion. The allocation underlines a production-first strategy that could cap medium-term crude price spikes if execution holds—relevant for petro-FX (CAD, NOK) and broader inflation expectations.

Equities and crypto: divergence returns

– Microchip Technology (MCHP) jumped 12.2% after upbeat guidance, extending a rally in select semis.
– Vertex Pharmaceuticals (VRTX) climbed 6.9% on an analyst upgrade.
– Alexandria Real Estate (ARE) plunged 10.1% following a dividend cut and softer FFO outlook, underscoring stress points in rate-sensitive REITs.
– MicroStrategy (MSTR) faces an $8 billion downside risk despite Bitcoin’s run to $91,000, with the stock down 34.3% over the past month—highlighting leverage and equity-beta risks in crypto proxies.
– ABTC slumped 39% amid lock-up expiry and profit-taking fears, as talk of a renewed crypto “winter” cools recent political tailwinds.

For equity index futures and risk proxies, rotation remains uneven: high-quality tech outperformed on earnings momentum, while yield-sensitive sectors lagged on policy uncertainty.

Market plumbing: CME outage rattles confidence

A 10-hour outage at CME disrupted trading flows and data continuity across futures markets. With roughly $1.7 trillion linked to affected indexes, participants reported data gaps and potential P&L hits. Such episodes tend to widen bid-ask spreads, raise margin frictions and, in stressed moments, spill over into FX and rates via impaired hedging. Liquidity risks can outlast the headline, keeping volatility surfaces elevated.

Key points for traders

• Core PCE at 2.9% sustains disinflation but not mission accomplished—rate-cut odds hinge on labor data.
• Fed chair speculation could re-price term premia and the dollar through credibility and policy-path expectations.
• Chevron’s capex skew to upstream (U.S. shale, Guyana) may temper medium-term oil spikes, shaping petro-FX and inflation hedges.
• Equity dispersion is back: semis and select biotech firm up; REITs and crypto proxies under pressure.
• CME’s outage is a reminder that liquidity and operational risk can drive cross-asset volatility beyond fundamentals.

What’s next

– Forward guidance from Fed officials on the balance between inflation and employment will set the tone for the dollar and front-end yields.
– Energy market reaction to Chevron’s spending split could inform Brent-WTI spreads and commodity FX.
– Watch positioning and liquidity after the CME disruption; follow-through in futures could ripple into cash equities, rates and G10 FX.

FAQ

What does a 2.9% core PCE mean for the dollar?

It keeps the Fed from declaring victory on inflation, anchoring U.S. rates relatively high versus peers. That backdrop can support the dollar, but if labor conditions weaken and the Fed signals cuts, USD strength may fade at the front end while the long end responds to policy credibility and term premia.

Could the Fed still cut with inflation above 2%?

Yes. If the job market softens meaningfully, the Fed could prioritize employment and financial stability. Markets are weighing that trade-off now, which is why rate expectations—and FX—are reacting more to labor signals than to modest inflation progress.

How might Chevron’s 2026 capex affect oil and petro-FX?

More upstream investment in U.S. shale and Guyana points to resilient supply, potentially capping upside in crude over the medium term. That would ease inflation pressure and could temper gains in petro-currencies like CAD and NOK if prices stabilize.

Why does talk of the next Fed chair matter to markets?

The chair shapes policy credibility and communication. A pick perceived as less orthodox could lift long-term yields by increasing term premia, pressure equities, and support the dollar through higher real rates. Conversely, a continuity candidate might calm curves and risk assets.

What happened at CME and why does it matter beyond futures?

A 10-hour outage created data gaps and potential losses linked to about $1.7 trillion in indexes. Liquidity frictions in futures often spill into cash markets and FX, widening spreads and lifting volatility as hedging becomes less efficient.

Why are crypto-linked stocks diverging from Bitcoin?

Equity proxies like MicroStrategy add leverage, corporate risk and positioning dynamics on top of Bitcoin’s price. Lock-up expiries, profit-taking and financing costs can magnify downside even when spot BTC rallies, amplifying volatility across the crypto-equity complex.

Reporting by BPayNews.