Fundamental Overview
Last Friday, the JPY weakened across the board following the BoJ policy decision as Governor Ueda made a surprisingly dovish turn by saying that “there is some time to make a decision on monetary policy because upside price risks have decreased given the recent FX moves”.
He also mentioned that it’s important for them to check overseas economic trends including US when making policy decisions. This suggests that the Fed’s 50 bps cut is making them fear more JPY appreciation and decreases the need to act with more tightening.
Now that the Fed’s 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 managed to rally all the way to the 144.00 handle where we have a downward trendline now acting as resistance. This is where we can expect the sellers to step in with a defined risk above the trendline to position for a drop back into the 140.00 handle. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 150.00 handle next.
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. If we get a pullback, we can expect the buyers to lean on the trendline to position for a break above the major downward trendline. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 140.00 handle.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have two support zones:
- The one around the 143.50 level where we can also find the 38.2% Fibonacci retracement level for confluence.
- The one around the trendline where we can find the 61.8% Fibonacci retracement level for confluence.
The buyers will likely step in around those levels to position for new highs, while the sellers will look for downside breakouts to increase the bearish bets into new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Flash PMIs. Tomorrow, we get the US Consumer Confidence report. On Thursday, we have the US Jobless Claims. On Friday, we conclude the week with the Tokyo CPI and US PCE.
