Fundamental Overview
The USD weakened across the board following soft US Jobless Claims and ISM Services PMI reports. Overall, the data didn’t change much in terms of interest rates expectations, but it reinforced the view that the Fed is going to deliver at least two rate cuts by the end of the year. All else being equal, the risk sentiment should remain supported amid the pickup in global growth.
Even if the US Dollar weakens against the other major currencies, the JPY in this environment should keep losing ground and the Japanese officials can’t do much to reverse the trend unless the fundamentals change. 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 started a pullback after the soft US data on Wednesday. From a risk management perspective, the buyers will likely step back in around the 160.00 level with a defined risk below it to position for a rally into new highs.
The sellers, on the other hand, will want to see the price breaking below the 160.00 handle to increase the bearish bets into the major trendline around the 157.00 level.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke below a key minor trendline that was defining the bullish momentum from the 156.00 level. The sellers piled in one the break to position for a drop into the 160.00 level. That’s where the buyers will look to buy the dip with a better risk to reward setup.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg lower printed a new lower low, so we now have a minor downward trendline defining the current bearish momentum. If we get a pullback, the sellers will likely lean on the trendline to position for a continuation of the pullback into the 160.00 handle with a better risk to reward setup.
The buyers, on the other hand, will want to see the price breaking higher to regain some control and position for a rally into new highs. The white lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US NFP report where the data is expected to show 190K jobs added in June and the Unemployment Rate to remain unchanged at 4.0%.