Fundamental Overview
The generally positive risk sentiment continues to weigh on the JPY as the carry trade remains in cruise control. The market is also less fearful of an intervention before the 160.00 handle as it’s been pretty clear that the Japanese can’t do anything to stop the Yen depreciation without a change in the fundamentals. Therefore, everything will hinge on the US inflation figures where hot data will likely take us to 160.00 in the blink of an eye while soft readings might trigger a short-term correction.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY has been rallying non-stop since the dip provided by the miss in the US NFP report. Overall, the big picture uptrend remains intact as global growth expectations and the stark differential in interest rates are big headwinds for the JPY. The trend will likely reverse only when we start to see recessionary US data. Until then, the 160.00 handle will remain the first target but if all else remains equal, we can expect much higher prices ahead.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price recently broke above the first key swing level at 156.28. This has opened the door for a move into the next swing level at 158.00. A lot will depend on the US inflation data but a spike lower into the 155.00 support should see the buyers fading the move and position for a rally into the 160.00 level. The sellers, on the other hand, will need to break below the 155.00 support to start targeting the 152.00 price region.
Upcoming Catalysts
Today we have the US PPI and Fed Chair Powell speech. Tomorrow, we get the US CPI report and the US Retail Sales data. On Thursday, the focus will be on the latest US Jobless Claims figures to see whether the last week’s numbers were the start of a trend or just a fluke.
