Fundamental Overview
It looks like the market is taking some breather after an incredible rally in the USDJPY pair. This week was pretty empty on the data front, and we haven’t got any meaningful catalyst. The main culprit for the US Dollar strength has been the rally in long term Treasury yields.
The yield curve has been bear-flattening which is what you would expect with higher growth and potentially higher inflation expectations. There’s been a good argument that the markets have been already positioning for a Trump victory which is expected to strengthen the higher growth and less rate cuts expectations.
For now though, this is the trend and it’s generally a bad idea to fight such trends without a strong 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.
On the JPY side, there's not much new. We got the Tokyo CPI today and the data missed expectations showing once again that there's no inflationary threat in Japan and the BoJ can keep postponing the rate hike.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY eventually pulled back to the key 152.00 handle. This is where we can expect the buyers to step in with a defined risk below the level to position for the continuation of the rally into the 155.00 handle next. The sellers, on the other hand, will likely pile in around this level to extend the drop into the 149.40 level.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have an upward trendline defining the current bullish momentum. The buyers will likely lean on the trendline to target new highs, while the sellers will want to see the price breaking lower to increase the bearish bets into the 149.40 level.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline defining the recent pullback. The sellers will likely lean on it to position for the break below the major trendline, while the buyers will want to see a break higher to pile in for a rally into new highs. The red lines define the average daily range for today.
