Fundamental Overview
The USD continues to consolidate around the highs except against the commodity currencies where it extended into new highs. The US inflation data last week was once again a disappointment although the data that feeds into the Core PCE was overall benign as forecasters expect a 0.13% M/M increase.
Nonetheless, the Treasury yields continue to climb and are now back around the post-US election highs. There’s some understandable uneasiness in the bond market given the hot US data and the Fed continuing to cut into an accelerating economy.
On the JPY side, the market increased the probabilities for no change at this week’s BoJ decision following a report from Bloomberg last week 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. Most of the USD/JPY gains though can be attributed to the rise in Treasury yields with the focus now switching to the FOMC Policy Decision on Wednesday.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY broke above the key 151.90 level and extended the rally into the 154.00 handle. From a risk management perspective, the buyers will have a better risk to reward setup around the 151.90 support to position for a rally into the 160.00 handle next. The sellers, on the other hand, will want to see the price breaking lower to target a drop into the 149.40 level.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have an upward trendline defining the current bullish momentum on this timeframe. The buyers will likely lean on the trendline with a defined risk below it to position for a rally into new highs, while the sellers will look for a break lower to target the 151.90 support.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a nice minor support zone around the 152.80 level where there’s the confluence with the trendline. This is where we can expect the buyers stepping in to position for new highs, while the sellers will look for a break lower to target the 151.90 support. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we have the US Flash PMIs. Tomorrow, we get the US Retail Sales data. On Wednesday, we have the FOMC Policy Decision. On Thursday, we have the BoJ Rate Decision and the US Jobless Claims. On Friday, we conclude with the Japanese CPI and the US PCE data.
