The USD weakened across the board yesterday following a notable miss in the US initial claims data as that added some more pressure on the USD with the market weighing the possibility that the labour market could weaken fast enough in the next months to justify more rate cuts than expected. Overall though, the price action has been rangebound this week as the lack of key catalysts and the waiting for the US CPI report kept the market at bay.
The JPY, on the other hand, doesn’t have much fundamental support as the BoJ might not be able to lift interest rates again given the easing inflation rates, although there might be some short-term support from hawkish messages around the reduction of the QE programme. All else being equal, the USDJPY pair should remain in an uptrend both from the Fed’s higher for longer stance and global growth expectations. The only thing that can change the trend at the moment is much weaker US data.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY continues to run to the upside as the lack of fundamental support and the failure of the Japanese interventions is giving the buyers enough conviction to keep bidding the pair towards the key 160.00 level. That’s where we will likely see the sellers stepping in with more conviction to position for a drop back into the trendline. For the time being, the buyers remain in control.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the next resistance to watch will be the 156.28 level as a break to the upside should see the buyers increasing the bullish momentum into the next resistance around the 158.00 handle. The target remains the 160.00 handle and unless we get a downside surprise in the US inflation figures next week, we will likely see the pair continuing to drift higher.
Upcoming Catalysts
Today we conclude the week with the University of Michigan consumer sentiment survey. It’s unlikely that we will see major changes to the market’s expectations though, so the next big event to watch will be the US CPI next Wednesday.
