Fundamental Overview
The US Dollar continues to consolidate around the highs as the market reached the peak in the repricing of interest rates expectations and it will need stronger reasons to price out the remaining rate cuts for 2025.
This was signalled by the lack of US Dollar strength after lots of strong US data with the market’s pricing remaining largely unchanged around three rate cuts by the end of 2025. We might see the greenback remaining on the backfoot at least until the US CPI due next week.
On Monday, Fed’s Waller and Fed’s Williams sounded like a rate cut in December is basically a done deal with the plan to slow the pace of rate cuts considerably in 2025. We will likely need another hot CPI report to force them to skip the December cut.
On the JPY side, the market pared back the probabilities for a rate hike in December from 58% to 37% now, although it continues to expect at least two rate hikes by the end of 2025. We haven’t got anything in the meantime, so the latest repricing might be due entirely to JPY strength. We get the Japanese wage data on Friday and an upside surprise might give the JPY a boost.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY bounced around the 149.40 level as the buyers stepped in to position for a rally into the 160.00 handle. From a risk management perspective, the sellers will have a better risk to reward setup around the key 151.90 level. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a downward trendline defining the bearish momentum on this timeframe. The sellers will likely lean on it with a defined risk above the 151.90 level to position for a drop into new lows. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is testing the minor resistance zone around the 150.50 level where the price reacted from several times in the past days. We can expect the buyers to increase the bullish bets into the trendline if we get a breakout. The sellers, on the other hand, will likely step in around these levels to position for a drop into the lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we have the US ADP, the US ISM Services PMI and Fed Chair Powell speaking. Tomorrow, we get the latest US Jobless Claims figures. Finally, on Friday, we conclude the week with the Japanese wage data and the US NFP report.
