Fundamental Overview
The USD started the week on the backfoot as the new month begins. The last week’s strength might have been influenced more by quarter-end flows rather than something fundamental as the economic data didn’t change interest rates expectations. Nonetheless, the data continues to support the risk sentiment amid a pickup in growth without inflationary pressures.
Even if the US Dollar weakens against the other major currencies, the JPY in this environment should keep losing ground and the Japanese officials can’t do much to reverse the trend unless the fundamentals change. We will likely need weak US growth data to see some sustained Yen strength, although it might be short lived if it’s not enough to make the market to price in more aggressive rate cuts for the Fed.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY eventually managed to break above the key 160.00 handle and extended the rally as the lack of intervention gave the market a bit more confidence to target new highs.
If we get a pullback into the 160.00 level, we can expect the buyers to step back in with a defined risk below the level to target new highs. The sellers, on the other hand, will want to see the price falling back below the 160.00 handle to gain some conviction and start targeting the major trendline around the 157.00 handle.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor trendline defining the current upward momentum. We can expect the buyers to lean on the trendline to keep pushing into new highs, while the sellers will need to see the price breaking below the trendline and the 160.00 level to start targeting new lows.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance zone around the 161.25 level as the price continues to consolidate just beneath it. The buyers will want to see the price breaking higher to increase the bullish bets into the 165.00 level next, while the sellers will keep on looking for a break below the trendline to target a pullback into the 160.00 handle. The white lines define the average daily range for today.
Upcoming Catalysts
This week is full of important events. We begin today with the release of the US ISM Manufacturing PMI. Tomorrow, we have the US Job Openings and Fed Chair Powell speaking. On Wednesday, we get the US ADP, the US Jobless Claims, the US ISM Services PMI and the FOMC Meeting Minutes. Thursday is going to be a US Holiday for Independence Day. Finally, on Friday, we conclude the week with the US NFP report.
