Fundamental Overview
The USD is weaker across the board following the soft US PPI report yesterday. The market pricing is now showing a total of 31 bps of easing by year end compared to 24 bps before the PPI. The focus remains on the US CPI report today.
A hot report will likely cause some trouble in the markets with the stock market looking as the most vulnerable right now.The best outcome would be a soft report given the overstretched moves in the markets caused by the repricing in rate cuts expectations.
That would likely reverse most of the recent trends and trigger a correction in Treasury yields and therefore in the US Dollar.
On the JPY side, BoJ’s Ueda delivered some comments on monetary policy tonight and it seemed like the January decision next week could still be live for a rate hike.
This is in line with the recent news saying that the BoJ was still mulling on the rate decision for January and that the central bank was considering raising its inflation forecasts. The market is now pricing a 70% probability of a rate hike next week.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is still consolidating around the recent highs. From a risk management perspective, the buyers will have a better risk to reward setup around the major trendline, while the sellers will look for a break below the trendline to extend the drop into the 149.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the rangebound price action with the price now falling from the 158.00 resistance as the sellers stepped in to target a drop back into the support. The buyers will likely pile in around the support to position for a rally into the 160.00 handle next.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the sellers will keep on pushing towards the support, while the buyers will look for a bounce around the support or a break above the resistance to target new highs.
The red lines define the average daily range for today although they are less reliable given that we’ve been stuck in a range for several weeks. The price can extend beyond them today after the US CPI release.
Upcoming Catalysts
Today, we have the US CPI report, while tomorrow we get the latest US Jobless Claims figures.