The US data continues to surprise to the upside and as a consequence led the market to reprice interest rates expectations on the more hawkish side as the Fed members keep on repeating that two or more rate hikes cannot be ruled out if the data remains solid. On the other hand, the BoJ remains stuck with its loose monetary policy causing further weakness in the JPY. There are small hints that the BoJ may tweak the YCC policy at the next meeting, but the central bank has been disappointing markets for quite a long time now.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY keeps on charging higher with almost no pullbacks. This strong rally is led by the hawkish repricing in interest rates expectations as the US data keeps on surprising to the upside. The breakout of the resistance at 142.17 has opened the door for a rally towards the 150.00 level as there’s no clear strong resistance until then.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the current rally is supported by the moving averages as the buyers keep on leaning on them to position for further upside. In fact, now that the price is pulling back into the red 21 moving average and the trendline, we can expect the buyers to step in again. The sellers, on the other hand, will need to see the price to break below the trendline to start looking for a bigger pullback into the 142.17 resistance now turned support.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see how cleanly the price has been printing higher highs and higher lows and that the whole move after the breakout is diverging with the MACD. This is generally a sign of weakening momentum often followed by pullbacks or reversals. So, as long as the price stays above the trendline we can expect more upside, but a break lower would signal the pullback towards the 142.17 support. Today, we have the US PCE report and a beat is likely to strengthen the USD leading to more upside in USDJPY, but a miss should provide the pullback into the 142.17 support.
