Fundamental Overview
The USDJPY pair eventually erased the entire drop following the more dovish than expected Powell’s speech at the Jackson Hole Symposium. The focus is now on the key data this week with the ISM Manufacturing PMI and the NFP reports in the spotlight.
The market is waiting for the key economic releases this week, and especially the NFP report, as that will likely decide whether the Fed is going to deliver a standard 25 bps cut or go for a more aggressive 50 bps cut in the upcoming meeting.
Right now, it looks like the Fed is going to cut rates into a resilient economy, so one has to be mindful that we might eventually get an increase in economic activity that could lift long term yields.
That might not be the market’s focus at the moment but it’s something to keep an eye on. The focus right now is on the US labour market data as more weakening could not only trigger a more aggressive Fed easing but also bring back recessionary fears which should support the yen.
Therefore, besides the headline ISM number today, watch also the employment sub-index as a drop into new lows could spook the markets while an improvement could lead to a positive sentiment.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY hasn’t moved much as the market has been waiting for stronger catalysts to push the pair in either direction. This week is going to be very important as we get the ISM Manufacturing PMI and the NFP report. On the upside, the buyers will target the 150.00 handle, while on the downside, the sellers will look for the 140.00 handle.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price recently broke above the major downward trendline and increased the bullish momentum as the buyers piled in while the sellers squared their positions.
We now have a minor upward trendline defining the current momentum and we can expect the buyers to lean on it to position for a rally into the 150.00 handle. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 140.00 handle.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a strong support zone around the trendline where we can also find the confluence of the previous swing low level and the 61.8% Fibonacci retracement level.
This is where the buyers will likely pile in with a defined risk below the support to position for a rally into the 150.00 handle. The sellers, on the other hand, will want to see the price breaking lower to target new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US ISM Manufacturing PMI. Tomorrow, we have the US Job Openings. On Thursday, we get the Japanese wage data, the US Jobless Claims figures and the ISM Services PMI. Finally, on Friday, we conclude the week with the US NFP report.