Fundamental Overview
The Yen lost some ground this week as the market stabilised after the strong rout seen on Monday. Yesterday, we saw some more weakening as BoJ’s Uchida delivered some dovish comments citing the recent volatility in the markets. That helped the global sentiment a bit, but most of the gains were erased soon after.
The market is still pricing a 50 bps cut in September and a total of 110 bps of easing by year-end for the Fed, while the chances for another BoJ rate hike remain low with just 7 bps of tightening priced in by year-end.
In the American session we will get the latest US Jobless Claims figures. Given the market’s sensitivity to weak releases, if we get bad data, we might see some more risk-off flows coming into the market. On the other hand, good figures could see the risk sentiment improving.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY bounced around the 142.00 handle and pulled back to the 148.00 handle near the broken trendline. The sellers stepped in around the trendline to position for a drop into the 140.20 level. If we were to get another flush lower, the buyers will likely step in around the 140.20 level with a defined risk below it to position for a rally into new highs.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price recently broke above the minor downward trendline and extended the rally as the buyers increased the bullish bets and we got some dovish comments from BoJ’s Uchida. The natural target should be the major downward trendline around the 150.00 handle. If we get there, the sellers will likely lean on the trendline to position for a drop into the 140.00 handle with a much better risk to reward setup.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price today broke below the upward trendline. That’s generally a sign of a change in momentum, so we might see some more selling pressure coming into the market.
The sellers will likely pile in around these level to position for a drop into the 144.00 handle, while the buyers will want to see the price rising back above the trendline to target a rally into the 150.00 handle. Watch out for the US Jobless Claims today as there’s a very high chance that it’s going to move the market a lot. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures which will likely be a strong market moving release given the market’s focus on the labour market. The market will also pay close attention to Fed members’ comments with Fed’s Barkin scheduled to speak later in the day.