Fundamental Overview
The USD continues to reign supreme despite the lack of catalysts. The main culprit for the recent strength in the US Dollar has been the rally in long term Treasury yields. The yield curve is bear flattening which is what you would expect with higher growth and potentially higher inflation expectations.
The catalyst for this was the latest FOMC decision and the US NFP report added fuel to the fire. There’s also been a good argument that the markets are already positioning for a Trump victory which is expected to strengthen the higher growth and less rate cuts expectations.
For now, this is the trend and it’s generally a bad idea to fight such trends without a catalyst. Unfortunately, we don’t have much left for October as the main events will be in the first weeks of November when we will get the top tier economic reports, the US elections and the FOMC decision.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY eventually shot higher and reached the 152.00 handle. This is where we can expect the sellers to step in with a defined risk above it to position for a drop back into the 149.40 level, while the buyers will likely increase the bullish bets into the 160.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the recent price action with a strong push higher in the last two days. From a risk management perspective, the buyers will have a better risk to reward setup around the trendline as today’s move might be overstretched. The sellers, on the other hand, will look for a break lower to increase the bearish bets into new lows.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price in the Asian session rallied quickly into the upper bound of today’s average daily range. Chasing the rally at these levels might not be a good idea. We have a minor upward trendline defining the current momentum. We can expect the buyers to lean on it to target new highs, while the sellers will look for a break lower to pile in for a drop into the next trendline.
Upcoming Catalysts
Tomorrow we get the Flash Japanese and US PMIs, and the US Jobless Claims figures. On Friday, we conclude the week with the Tokyo CPI report.
