Fundamental Overview
Nothing has changed in terms of the fundamentals this week as the market awaits the US NFP and the US CPI data. The US Dollar continues to consolidate around the highs as the market reached the peak in the repricing of interest rates expectations and it will need stronger reasons to price out the remaining rate cuts for 2025.
This was signalled by the lack of US Dollar strength after lots of strong US data with the market’s pricing remaining largely unchanged around three rate cuts by the end of 2025. We might see the greenback remaining on the backfoot at least until the US CPI due next week.
On Monday, Fed’s Waller and Fed’s Williams sounded like a rate cut in December is basically a done deal with the plan to slow the pace of rate cuts considerably in 2025. We will likely need another hot CPI report to force them to skip the December cut.
On the JPY side, the market pared back the probabilities for a rate hike in December from 58% to 40% now, although it continues to expect at least two rate hikes by the end of 2025. We haven’t got anything in the meantime, so the latest repricing might be due entirely to JPY strength.
We got the Japanese wage data today but it came in line with estimates. At this point, the market is seeing higher chances for a cut in January 2025.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is consolidating above the 149.40 level as the buyers continue to pile in to position for a rally into the 160.00 handle. From a risk management perspective, the sellers will have a better risk to reward setup around the key 151.90 level. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a downward trendline defining the bearish momentum on this timeframe. The sellers will likely lean on it with a defined risk above the 151.90 level to position for a drop into new lows. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we’ve been having a very choppy price action recently as the market was waiting for the key catalysts before picking a direction. Today we have the US NFP report and good data will likely provide a spike into the trendline that the sellers can fade to position for a drop into new lows.
We will likely need very strong data to see a change in the market’s pricing and give the USD a bigger boost. In case the data is worse than expected, the sellers should take easily control and drive the pair much lower. The red lines define the average daily range for today.
Upcoming Catalysts
Today, as mentioned previously, we conclude the week with the US NFP report.
