As the US economic data continues to beat expectations, the market is pricing in a more hawkish path for interest rates as the Fed members keep on repeating that two or more rate hikes are expected if the economy remains strong.
Conversely, the BoJ maintains its dovish stance keeping rates at -0.10 and the YCC at the usual settings. Core inflation in Japan keeps on rising and there are only slightly tentative signs of a possible exit from the current policy. As long as the policy divergence between the two central banks continues, we should see more higher highs for the pair.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that after breaking above the key 142.17 resistance, where we also had the 61.8% Fibonacci retracement level of the entire drop from the October 2022 high, the USDJPY just kept on rallying with basically no pullbacks. The trend is undoubtedly bullish from both a fundamental and technical side and only bad US data or a hawkish BoJ can change that.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is now starting to bend as the market is consolidating ahead of the key economic releases in the next days. The moving averages are crossing over and it may be a signal of a pullback incoming. A good level of support for the buyers to position for new longs is the trendline where we can also find the 38.2% Fibonacci retracement level and the previous resistance now turned support. The sellers, on the other hand, will want to see the price to break below the support zone to pile in even more aggressively and target the next trendline near the 140 handle.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the bullish momentum is waning as the price broke out of the rising channel and it’s now ranging between the 144.00 and 145.00 levels. We can expect the buyers to pile in in case the price breaks above the 145.00 resistance. On the other hand, we should see more sellers jumping onboard as soon as the price breaks below the 144.00 support targeting the 142.50 support.
Upcoming Events
Today the US is on holiday for Independence Day, so liquidity in the market will be thinner. In the following days we will get top tier economic indicators like the US Jobless Claims and ISM Services PMI on Thursday and the main event of the week: the US NFP report on Friday.
