Fundamental Overview
The USD remains on the backfoot as the US data continues to point to resilient growth with falling inflation. This week, we got a good US Retail Sales report suggesting that the stories of deteriorating consumer spending have been exaggerated. Overall, this should continue to support the soft-landing narrative and be positive for the risk sentiment.
The JPY in this environment should keep losing ground against the major currencies and the Japanese officials can’t do much to reverse the trend unless the fundamentals change. Yesterday, the price broke through a key trendline and triggered a quick move lower in the USDJPY pair probably due to stops getting triggered.
Overall, the Yen will likely need weak US growth data to see some sustained strength on recessionary fears and more aggressive rate cuts expectations. But as long as we have stable global growth and generally positive risk sentiment, the JPY should remain in a downtrend.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY broke through the key trendline around the 158.00 handle and saw an increase in the bearish momentum as the sellers piled in and the buyers had to square their positions. Technically, the next target should be the 152.00 level where we will likely find the buyers stepping in to position for a new cycle high. For now, the sellers remain in control.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a good resistance zone around the 157.00 handle where we can find the confluence of the minor downward trendline and the Fibonacci retracement levels.
This is where we can expect the sellers to step in with a defined risk above the trendline to position for a drop into the 152.00 level with a better risk to reward setup. The buyers, on the other hand, will want to see the price rising back above the 158.00 level to regain control and position for a rally into a new cycle high.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the bearish setup around the trendline. The white lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures, while tomorrow we conclude the week with the Japanese CPI data.
