Fundamental Overview
The US Dollar continues to consolidate despite the higher-than-expected inflation figures and a less dovish Powell last week. The market’s pricing remained largely unchanged at three rate cuts by the end of 2025.
This might be a signal that the market is now fine with the current pricing, and we will need stronger reasons to price out the remaining rate cuts. This could lead to some general US Dollar weakness in the short term.
On the JPY side, the market is pricing a 47% chance of a rate hike in December and a total of 45 bps of tightening by the end of 2025. The reason for higher chances for the December hike might be entirely due to the quick Yen depreciation as that was one of the main reasons behind the last hike.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY probed below the trendline yesterday on some risk aversion but eventually bounced back strongly. The buyers piled in as the price rallied above the trendline and keep on targeting the 160.00 handle. The sellers, on the other hand, will want to see the price falling back below the trendline to position for a drop into the 152.00 support.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the recent price action with the break below the trendline and the rally back above it. There’s not much we can glean from this timeframe but we can expect the buyers to increase the bullish bets on a break above the most recent high at 156.80, while the sellers will likely lean on it to position for the break below the trendline.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a swing high level at 155.35 that could act as support but the sellers will gain more conviction with a break below the swing level and the trendline. The buyers, on the other hand, will likely step in around those levels to position for new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the Japanese CPI and the Japanese and US PMIs.
