Fundamental Overview
The USD has been marginally weaker against the major currencies recently due to lower than expected US inflation figures last week that sent Treasury yields lower and made the market to price in higher chances of a second rate cut by the end of the year.
We’ve also got lots of whipsaws in the last couple of days caused by Trump’s tariffs headlines. That’s been keeping the volatility high this week despite the lack of key economic reports.
Overall, it seems like the market is optimistic about tariffs and the news that
Trump is considering a 10% tariff on China might be a signal that he won’t be as aggressive as promised during his campaign given that back then he talked about 60% tariff on China.
On the JPY side, nothing has changed as the market continues to expect a 25 bps rate hike tomorrow with the probabilities now standing around 95%. The yen has been weak throughout the week as there might be some profit taking ahead of the BoJ decision given that a disappointment could lead to a quick selloff in the JPY.
The focus will be on forward guidance. The market already expects another rate hike by the end of the year, so we will need the central bank to open the door for even more hikes or some risk off in the market to trigger more JPY gains.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY has been basically consolidating since last Friday as the market awaits the BoJ decision tomorrow. From a risk management perspective, the buyers will have a better risk to reward setup around the major
trendline to position for a rally into the 160.00 handle. The sellers, on the other hand, will look for a break below the trendline to extend the drop into the 149.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke above the downward trendline that was defining the bearish momentum. The buyers will likely pile in around these levels to position for a rally into the 160.00 handle, while the sellers will look for a drop back below the trendline to target the major trendline.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is trading around the resistance zone. We have a minor upward trendline defining the current bullish momentum on this timeframe. The buyers will likely continue to lean on it to keep targeting new highs, while the sellers will look for a break lower to position for a drop into the major trendline around the 154.50 level. The red lines define the
average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures, while tomorrow we conclude the week with the Japanese CPI, the BoJ Rate Decision and the Flash PMIs.
Watch the video below
This article was written by Giuseppe Dellamotta at
www.forexlive.com.
