Fundamental Overview
The USD was sold across the board on Wednesday following the soft US CPI report. The data made the market to price back in two cuts for this year. Later in the day though we got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed sees just one cut for this year despite the soft US CPI report.
This gave the greenback a boost although Fed Chair Powell backpedalled on the projections making them a bit less worrying as the central bank remains very data dependent. Moreover, the US Dollar found further support yesterday as the market went into risk-off mode for unclear reasons.
The JPY continues to lose ground against the major currencies amid the general pickup in global growth and overall positive risk sentiment, even if we get bouts of risk-off here and there. It looks like there’s nothing at the moment that can support the Yen except weaker US growth data.
Moreover, the BoJ today disappointed the markets once again leaving bond purchases unchanged despite expectations of a reduction. This was reversed in the press conference as BoJ Governor Ueda said that they will begin tapering bond purchases immediately after the July meeting and the size of the tapering will be substantial.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY continues to drift higher as the pickup in global growth and the positive risk sentiment continued to weigh on the Yen.
The buyers are still targeting the intervention level at 160.00 and it’s hard to see a turnaround in the bullish trend without weaker growth data from the US. The sellers will need the price to break below the trendline to gain more conviction and start looking for new lows with the 151.85 level as the first target.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is trading inside a rising channel and got rejected from the top trendline where we had also the key 158.00 handle for confluence.
This is where we can expect the sellers to pile in with a defined risk above the resistance to position for a drop back into the major trendline. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the key160.00 handle.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price spiked higher today as the BoJ disappointed leaving bond purchases unchanged despite expectations of a reduction. The gains though were erased soon after as BoJ Governor Ueda delivered some hawkish comments. The buyers stepped in around the recent minor resistance zone around the 157.30 level where we had also the confluence of the 38.2% Fibonacci retracement level.
If the price falls below this zone, we can expect the buyers to lean on the lower bound of the channel where they will also find the 61.8% Fibonacci retracement level. The red lines define the average daily range for today, so it’s unlikely that we will see a breakout to the upside today without a strong catalyst.
Upcoming Catalysts
Today we conclude the week with the University of Michigan Consumer Sentiment survey where the data is expected to show an increase to 72.0 vs. 69.1 prior.