Fundamental Overview
The USD yesterday came under pressure following the miss in the US ISM Manufacturing PMI which triggered a drop in Treasury yields. In terms of market pricing, not much has changed as we still oscillate between one and two rate cuts by the end of the year. Nonetheless, the data reinforced the narrative that the next move is more likely to be a rate cut, and that inflation is likely to keep coming back to target.
The JPY got a boost mainly from the weak ISM PMI as the drop in Treasury yields weighed on the US Dollar. There’s nothing at the moment that can support the Yen except weaker US data. The US data this week could put further pressure on Treasury yields, which could be a tailwind for the Japanese currency.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY remains in an uptrend amid resilient US economic data and generally positive risk sentiment. The data this week could give the JPY enough strength to take the pair down to the major trendline where we will likely find the buyers stepping in to position for another rally into the 160.00 handle with a better risk to reward setup.
The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish bias and increase the bearish bets into the 152.00 handle.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the weak ISM PMI led to a break below the support around the 156.00 handle where we had the confluence of the minor trendline and the 38.2% Fibonacci retracement level.
The sellers piled in with a defined risk above the recent swing high to position for a drop into the major trendline. The buyers will now need the price to rally back above the trendline and the swing high at 156.50 to invalidate the bearish bias and position for a rally into the 160.00 handle.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a downtrend on this timeframe with the trendline defining the bearish bias. If we get a pullback, the sellers will likely lean on the trendline with a defined risk above the swing high at 156.50 to position for a drop into the major trendline around the 154.00 handle. The buyers, on the other hand, will want to see the price breaking higher to regain control and start targeting new highs. The red lines show the average daily range for today.
Upcoming Catalysts
Today we have the US Job Openings data. Tomorrow, we have the Japanese Wage data, the US ADP and the US ISM Services PMI. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US NFP report.
