Fundamental Overview
The USD continues to be backed by good economic data as we have also seen recently from the US PMIs last Friday and the US Consumer Confidence report this week. Yesterday, we also got the US Jobless Claims figures where the data showed that the labour market continues to rebalance via less job availability rather than more layoffs.
Such data keeps the interest rates expectations stable around two cuts by the end of the year and supports the risk sentiment amid a pickup in growth without inflationary pressures.
The JPY in this environment should keep losing ground against the major currencies. We will likely need weak US growth data to see some sustained Yen strength, although it might be short lived if it’s not enough to make the market to price in more aggressive rate cuts for the Fed.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY eventually managed to break above the key 160.00 handle and extended the rally as the lack of intervention gave the market a bit more confidence to target new highs.
If we get a pullback into the 160.00 level, we can expect the buyers to step back in with a defined risk below the level to target new highs. The sellers, on the other hand, will want to see the price falling back below the 160.00 handle to gain some conviction and start targeting the major trendline around the 157.00 handle.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor trendline defining the current upward momentum. We can expect the buyers to lean on the trendline to keep pushing into new highs, while the sellers will need to see the price breaking below the trendline and the 160.00 level to start targeting new lows.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see the average daily range for today defined by the white lines. We get the US PCE report today and it might trigger a bearish US Dollar reaction. The data won’t change anything for the Fed though, so the buyers will likely take it as a fading opportunity to pile in for new highs.
Upcoming Catalysts
Today we conclude the week with the US PCE report where the market expects the Core PCE to fall further towards the Fed’s 2% target.