The USD weakened across the board last week due to a more dovish than expected FOMC decision where the Fed decided to signal a bigger QT taper beginning in June and the Fed Chair Powell pushed back repeatedly against rate hike expectations. Moreover, the data on Friday showed that the Fed might indeed just keep rates higher for longer as job and wage growth soften.
The JPY, on the other hand, doesn’t have much fundamental support as the BoJ might not be able to lift interest rates again given the easing inflation rates, although there might be some short-term support from hawkish messages around the reduction of the QE programme. All else being equal, the USDJPY pair should remain in an uptrend both from the Fed’s higher for longer stance and global growth expectations.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY bounced on the strong support zone around the 152.00 handle where we had the confluence of the trendline and the 61.8% Fibonacci retracement level. The buyers stepped in and bought the dip offered by the miss in the US NFP report as that didn’t change much for the bigger picture. The sellers will need the price to break below the trendline to change the bias and start looking for new lows with the 146.00 handle as the first target.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we now have a strong resistance around the 155.00 handle where we can also find the downward trendline defining the current short-term bearish trend. That’s where we can expect the sellers to step in with a defined risk above the trendline and position for a break below the 152.00 support with a better risk to reward setup. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 160.00 handle.
Upcoming Catalysts
This week is pretty bare on the data front with just the Japanese wage data and the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment survey on Friday being the only notable releases. It’s unlikely that they will change the market’s expectations that much, so the price action might remain tentative heading into the US CPI next week, although the bias should remain bullish.
