Fundamental Overview
The USD got another boost on Friday following the NFP report as the data beat expectations by a big margin almost across the board. The market scaled back the rate cuts expectations further with now just one cut expected by the end of the year.
The focus remains on inflation and this week we get the US CPI report on Wednesday. This is the most important event of the month. Another hot report will likely cause some trouble in the markets with the stock market looking as the most vulnerable right now.
The best outcome would be a soft report given the overstretched moves in the markets caused by the repricing in rate cuts expectations. That would likely reverse most of the recent trends and trigger a rally in bonds, risk assets like stocks and bitcoin and lead to a selloff in the US Dollar.
On the JPY side, before the NFP report, we got some headlines saying that the BoJ was still mulling on the rate decision for January and that the central bank was considering raising its inflation forecasts.
We saw the JPY gaining across the board following the NFP report, which was kind of a head scratcher, but the market might be thinking that with rising Treasury yields and US Dollar, the BoJ could deliver a hike earlier than expected.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is still consolidating around the recent highs. From a risk management perspective, the buyers will have a better risk to reward setup around the major trendline, while the sellers will look for a break below the trendline to extend the drop into the 149.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the rangebound price action with the price now trading back below the 158.00 resistance. The sellers will now target a drop into the 156.00 support, while the buyers will want to see the price breaking above the resistance again to position for a rally into the 160.00 handle.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support around the 157.25 level as the price got rejected from several times. The sellers will look for a break lower to increase the bearish bets into the 156.00 support, while the buyers will likely wait for a break above the resistance to gain more conviction for new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow, we get the US PPI data. On Wednesday, we have the US CPI report. On Thursday, we get the latest US Jobless Claims figures.
