Fundamental Overview
The US Dollar is now lower across the board as the market erased most of the greenback’s gains following Trump’s victory. This has been a puzzling reaction as Trump’s policies are likely to spur growth and potentially end the Fed’s easing cycle earlier than expected.
We can argue that the market was already positioned for a Trump’s victory as we saw the greenback rallying for a couple of weeks leading into the US election. So, this might just be a “sell the fact” reaction and the market might now need more to keep bidding the USD.
Another possible explanation is that the market is more focused on global growth now and that’s generally bearish for the greenback. We saw something similar in 2016 when the USD rallied strongly once Trump got elected but after a couple of months, it went into a 2-year long downtrend.
The Fed for now remains neutral and on track to keep cutting rates. Yesterday, they cut by 25 bps as expected and given the overall neutral message, the market expects another 25 bps cut in December. Strong data from now until the December meeting though could change their plans for 2025.
We have the US CPI report next week and that’s going to be a test. If the US Dollar sells off on hot data, then the market might be indeed focusing on global growth rather than the potential for an earlier pause in the Fed’s easing cycle.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY failed to extend the rally above the recent high and it’s now on track to pull back to the key support zone around the 152.00 handle. The buyers will likely step back in around the support to position for a rally into new highs, while the sellers will look for a break lower to increase the bearish bets into the 148.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor upward trendline defining the current bullish momentum. We can also see that we have the confluence of the trendline and the support around the 152.00 level which should technically strengthen that support zone. That’s where the buyers will look for a bounce, while the sellers will look for a break lower.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline defining the current pullback into the 152.00 support zone. The sellers will likely keep on leaning on it to position for the break below the support, while the buyers will want to see the price breaking higher to pile in for a rally into new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the University of Michigan Consumer Sentiment report.