Fundamental Overview
Yesterday, the Fed finally started its easing cycle and decided to do it with a 50 bps cut. The market was already leaning towards a 50 bps move, so it wasn’t a surprise.
The larger cut was framed as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by the end of the year and less than the market expected in 2025.
The US Dollar weakened initially but eventually shot higher as Treasury yields rallied on a less dovish than expected Powell with the market pricing out the aggressive rate cuts expected in 2025.
Now that the decision is behind us, the focus will be on the economic data. If we start to see an improvement, then Treasury yields will likely continue to rise and drive USDJPY higher. Conversely, if the data weakens significantly, the market will start to worry about a recession and take USDJPY lower.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY bounced strongly from the 140.00 handle following the Fed decision. We got a rejection around the 143.50 level as the sellers stepped in around the previous swing low level.
The buyers will want to see the price breaking higher to increase the bullish bets into the 150.00 handle. The sellers, on the other hand, will want to see the price breaking through the 140.00 support to increase the bearish bets into new lows.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the rejection from the 143.50 level. If we get a deeper pullback, the buyers will likely lean on the upward trendline around the 141.00 handle to position for a break above the major trendline around the 145.00 handle.
The sellers, on the other hand, will want to see the price breaking below the trendline and the 140.00 support to increase the bearish momentum.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support zone around the 142.00 handle. This is where we can expect the buyers to step in with a defined risk below the support to position for a rally into the major trendline.
The sellers, on the other hand, will want to see the price breaking to the downside to increase the bearish bets into the 141.00 handle. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures, while tomorrow we conclude the week with the Japanese CPI and the BoJ Rate Decision.
