Fundamental Overview
The BoJ eventually decided to hike rates by 15 bps bringing the policy rate to 0.25%. This move was expected given that the day earlier we got lots of leaks. Governor Ueda in the press conference didn’t say too much but it looks like the weak Yen was the main reason for the rate hike as the economic data hasn’t been supporting such a move.
After some consolidation, the USDJPY pair broke through the key 152.00 handle and extended the losses into the 150.00 price region. There’s been a good argument that most of the moves we’ve been seeing in the past couple of weeks were driven by deleveraging from strengthening Yen.
Basically, the squeeze on the carry trades impacted all the other markets. Given the magnitude of the recent appreciation in the Yen and the correlation with many other markets, it looks like this could have been the reason indeed.
It will be interesting to see how things evolve in the next days and if this correlation fades. Today, we will also have the FOMC rate decision where the Fed is expected to keep rates steady and signal a rate cut in September.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY cracked through the key 152.00 support zone and extended the drop into the 150.00 price region. The sellers are now in control and the natural target should be the major trendline around the 148.00 handle.
That’s where the buyers will likely step in with a defined risk below the trendline to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking further lower to increase the bearish bets into the 146.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor downward trendline defining the current bearish momentum. From a risk management perspective, the sellers will have a better risk to reward setup around the 152.00 level and the trendline to position for further downside. The buyers, on the other hand, will want to see the price breaking those levels to start piling in for new highs.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has reached the lower bound of the average daily range for today, so we might see a bounce from these levels.
Upcoming Catalysts
Today we have the US ADP, the US Employment Cost Index and the FOMC Policy Decision. Tomorrow, we get the latest US Jobless Claims figures and the US ISM Manufacturing PMI. Finally, on Friday, we conclude the week with the US NFP report.
