Fundamental Overview
The US CPI report yesterday came in line with expectations and sealed the 25 bps cut next week with the probabilities standing around 97%. Overall, the market’s pricing remained largely unchanged around three rate cuts by the end of 2025.
This contributed to some US Dollar weakness although we are still consolidating around the highs. The market will likely need stronger evidence of inflation re-accelerating to price out the remaining rate cuts. For now, we reached the peak in the repricing.
On the JPY side, the market increased the probabilities for no change at this month’s BoJ decision following a report from Bloomberg yesterday saying that the central bank sees little cost of waiting for the next rate hike.
This is not something new as the market was already leaning for no change, but the JPY weakened across the board, nonetheless. The focus should be on the US Treasury yields. If today’s US PPI comes in soft, then we can expect some JPY strength.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY broke above the key 151.90 level yesterday following the Bloomberg’s report on the BoJ. The buyers piled in on the breakout and will now target a rally into the 160.00 handle. The sellers, on the other hand, will want to see the price falling back below the 151.90 level to position for a drop back into the lows.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke through a strong resistance zone as we had also the downward trendline for confluence. There’s not much else we can add here as the buyers will likely pile in around these levels to target new highs, while the sellers will look for a fall back below the trendline to target a drop into the lows.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline defining the current bullish momentum. If we get a pullback into it, we can expect the buyers to lean on the trendline to position for new highs with a better risk to reward setup. The sellers, on the other hand, will look for a break lower to target new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we get the latest US Jobless Claims figures and the US PPI. Tomorrow, we conclude the week with the BoJ’s Tankan Index.
