Fundamental Overview
The USDJPY pair eventually dropped back to the August low as a series of soft US data pushed Treasury yields lower giving the JPY a boost.
The NFP report on Friday wasn’t bad, on the contrary, the data under the hood was better than the prior month. Nevertheless, the trend in the labour market continues to remain skewed to the downside.
The probabilities for the Fed to cut by 50 bps at the upcoming meeting dropped to 27% following the NFP report with a total of 110 bps of easing expected by year-end. For the BoJ, the market sees a 99% probability of no change at the upcoming meeting and a total of 7 bps of tightening by year-end.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY eventually dropped back to the August low around the 141.70 level. We are now very close to the key 140.20 level. If the price gets there, we can expect the buyers to step in with a defined risk below the level to position for a rally into the 150.00 handle. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price action has been kind of rangebound between the 143.50 and 141.70 levels. If the price were to break higher, we can expect the buyers to pile in and position for a rally into the trendline around the 146.00 handle. Conversely, if we were to get a break lower, the sellers will increase the bearish bets into the 140.20 level targeting a break below it.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the choppy price action of the last few days. The NFP report was supposed to trigger a bigger reaction, but given the mixed data, the market got stuck in a consolidation. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the US Small Business Optimism Index. On Wednesday, we get the US CPI report. On Thursday, we have the latest US Jobless Claims figures and the US PPI data. On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.
