Fundamental Overview
After the strong push lower from last Friday when Fed Chair Powell delivered a more dovish than expected speech at the Jackson Hole Symposium, the USDJPY pair hasn’t moved much as the lack of catalysts this week kept the price action at bay.
The market is waiting for the key economic releases next week, and especially the NFP report, as that will likely decide whether the Fed is going to deliver a standard 25 bps cut or go for a more aggressive 50 bps cut in September.
Right now, it looks like the Fed is going to cut rates into a resilient economy, so one has to be mindful that we might eventually get an increase in economic activity that could lift long term yields.
That might not be the market’s focus at the moment because we will need a catalyst to change the narrative, but it’s something to keep an eye on. The focus right now is on the US labour market data as more weakening could not only trigger a more aggressive Fed easing but also bring back recessionary fears which should support the yen.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that after the rejection of the broken trendline around the 149.00 handle and the drop into the 143.50 level, USDJPY hasn’t moved much as the market awaits the key economic releases next week. There’s not much we can glean from this timeframe so we need to zoom in to see some more details.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price recently broke above the major downward trendline which could be a signal of a change in momentum. The buyers are starting to pile in to position for a rally into the 150.00 handle and a break above the last lower high at 146.50 should increase the bullish momentum. The sellers, on the other hand, will want to see the price breaking the recent lows around the 143.50 level to increase the bearish bets into the 140.00 handle.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline defining the current bullish momentum on this timeframe. The buyers will likely keep on leaning on it to position for new highs, while the sellers will want to see the price breaking lower to increase the bearish bets into new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US PCE report.