Fundamental Overview
The Yen is having another good week as the USDJPY pair dropped to new lows as Treasury yields continue to fall. We had two possible catalysts yesterday.
The first one was the much weaker than expected US NFIB Index which dropped to a 3 month low. There wasn’t an immediate reaction in the markets on the release, but things started to move as the American session began.
The second one was a comment from BoC’s Macklem where he said that bigger cuts are possible if the economy and CPI were weaker. There’s generally a groupthink with central banks, so the market might have projected that to the Fed’s decision next week.
The probabilities for the Fed to cut by 50 bps at the upcoming meeting increased to 35% and a soft US CPI report today might get us back to a 50/50 chance between 25 and 50 bps cut. For the BoJ, the market sees a 100% probability of no change at the upcoming meeting and a total of 8 bps of easing by year-end.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY eventually broke through the August low and almost touched the key 140.20 level. The buyers will likely start to pile in around these levels to position for a rally into the 150.00 handle, while the sellers will want to see the price breaking below the 140.00 handle to increase the bearish bets into new lows.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a downward trendline defining the current bearish momentum. The sellers will likely lean on the trendline with a defined risk above it to position for a break below the 140.00 handle 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 next major trendline around the 146.00 handle.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price bounced from the lower bound of the average daily range for today and it’s now approaching the resistance around the 141.70 level. This is where we can expect the sellers to step in with a defined risk above the level to position for another drop into the 140.20 level. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the trendline.
Upcoming Catalysts
Today we get the US CPI report. Tomorrow, we have the latest US Jobless Claims figures and the US PPI data. On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.
