USDJPY Technical Analysis

On the daily chart below, we can see that the big bullish wave in USDJPY stalled a few days ago as we reached peak hawkishness and then got an unwind due to some Fed members hinting to a pause in June. The bias remains bullish though as the price would need to break below the upward trendline to change the trend and make the moving average to cross downwards. Right now, we can see that USDJPY is approaching a nice support level at 138.16 where we can also find the red 21 moving average Moving average A moving average is a statistical tool that is used to smooth out short-term fluctuations in data and reveal longer-term trends. It is calculated by taking the average of a certain number of data points over a specific period of time, and then plotting that average as a line on a chart. The most common types of moving averages are simple moving averages (SMA) and exponential moving averages (EMA).In financial markets, moving averages are often used to analyze stock prices, exchange rates, and ot A moving average is a statistical tool that is used to smooth out short-term fluctuations in data and reveal longer-term trends. It is calculated by taking the average of a certain number of data points over a specific period of time, and then plotting that average as a line on a chart. The most common types of moving averages are simple moving averages (SMA) and exponential moving averages (EMA).In financial markets, moving averages are often used to analyze stock prices, exchange rates, and ot Read this Term.

USDJPY Technical Analysis

On the 4 hour chart below, we can see that the price was already signalling weakness in the bullish momentum as the price started to diverge with the MACD into the 140 handle. Once we got the breakout of the rising channel and the moving averages crossed to the downside, USDJPY just kept on falling also helped by yesterday’s softness in the ISM Manufacturing PMI and Unit Labour Cost reports.

The buyers are likely to lean on the 138.16 support where we can find the 38.2% Fibonacci retracement level. However, if we get a break to the downside and the price falls more, we will have an even stronger support near the 137 handle where we have the confluence of the trendline and the 61.8% Fibonacci retracement level.

On the 1 hour chart below, we can see that the short-term trend is bearish as we are making lower lows and lower highs. As long as USDJPY doesn’t break above the downward trendline, the bearish trend remains intact. So, as highlighted before, we have 3 different entry opportunities for the buyers:

• More aggressive buyers should lean on the 138.16 support and the 38.2% Fibonacci retracement level with a defined risk just below it.
• If this support fails, they can try again at the upward trendline and the 61.8% Fibonacci retracement level.
• More conservative buyers, may want to wait for the price breaking above the downward trendline to join the bullish wave and target the 142 handle.

The sellers, on the other hand, are likely to pile in at every breakout:

• If the price breaks below the 138.16 support, the sellers will jump onboard to ride the selloff into the trendline.
• On a break below the upward trendline, the sellers will pile in more aggressively as the trend is likely to change at that point and the target will be the 127.20 low.

The spotlight today will be on the US NFP report, with various potential scenarios that could unfold:

• If the data surpasses expectations, along with higher-than-anticipated average hourly earnings, it is likely to increase the chances of a rate hike in June and perhaps even price in some probability of a rate hike in July. This particular scenario may raise concerns within the market regarding a possible wage price spiral.
• Conversely, if the data is positive but falls short of expectations in terms of average hourly earnings, it is expected to further weaken the USD, as it would not have a significant impact on rate expectations and could even trigger soft landing vibes.
• If the data falls short of expectations across the board, it will be viewed as negative news and could potentially induce risk aversion in the markets, leading to lower Treasury yields and more bids in JPY. Moreover, based on recent comments from Fed officials, we might witness the USD weakening also due to diminished expectations of future interest rate hikes.