Fundamental Overview
The USD continues to remain supported since the last FOMC decision as the market perceived it as more hawkish than expected. After the rally during the low volume Christmas holidays, we are seeing a pullback pretty much across the board.
The market’s pricing didn’t change much with roughly two rate cuts priced in for this year, which is in line with the Fed’s projections. The central bank has switched its focus back to inflation, so the next US CPI report should have a bigger influence on interest rates expectations than the US NFP this Friday (barring big deviations).
On the JPY side, the BoJ left interest rates unchanged as expected at the last policy meeting but Governor Ueda delivered a less hawkish than expected presser.
In fact, he placed a great deal on wage data to decide on the timing of the next rate hike and added that the trend will become clearer in March or April. This made the market to price out the probabilities for a hike in January and push back once again to the next meeting which is scheduled for March.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is consolidating around the recent highs with the 158.00 handle acting as resistance. 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 between the 156.00 support and the 158.00 resistance. This week we have some key economic data, so the market participants will likely play the range until we get a breakout on either side to position for the next impulse.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the price remains confined in the range and we just wait for a breakout. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we get the US ISM Services PMI and the US Job Openings data. Tomorrow, we have the US ADP and the FOMC Meeting Minutes. On Thursday, we get the Japanese wage data and the latest US Jobless Claims figures. On Friday, we conclude the week with the US NFP report.
