Fundamental Overview
The USD regained some strength in latter part of last week. From the monetary policy perspective, nothing has changed as the market continues to expect at least two rate cuts by the end of the year and sees some chances of a back-to-back cut in November.
The data continues to suggest that the US economy remains resilient with inflation slowly falling back to target. Overall, this should continue to support the soft-landing narrative and be positive for risk sentiment.
The JPY in this environment should keep losing ground against the major currencies and the Japanese officials can’t do much to reverse the trend unless the fundamentals change. The Yen will likely need weak US growth data to see some sustained strength on recessionary fears and more aggressive rate cuts expectations. But as long as we have stable global growth and generally positive risk sentiment, the JPY should remain in a downtrend.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY broke through the key trendline around the 158.00 level recently, rallied back to retest it and eventually continued the move lower. For now, the sellers remain in control and will look for an extension to the 152.00 handle. The buyers, on the other hand, will need the price to rise back above the 158.00 handle to regain some control and start targeting new highs.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong resistance zone around the 158.00 handle. The buyers will want to see the price breaking above it to gain confidence on further upside, while the sellers will likely keep on defending the level and position for a drop into the 152.00 level.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have an interesting zone between the 156.50 and 157.00 levels where the price got rejected from several times in the past days. This might act as kind of barometer for the sentiment with the price staying above the zone being more bullish and below being more bearish. The white lines define the average daily range for today.
Upcoming Catalysts
This week is pretty empty on the data front. We begin on Wednesday with the release of the Japanese and US Flash PMIs. On Thursday, we will get the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the Tokyo CPI and the US PCE reports.