Fundamental Overview
The JPY started the week on the wrong foot following the Japanese elections over the weekend where the ruling party lost the majority. The main culprit for the US Dollar strength has been the rally in long term Treasury yields.
The yield curve has been bear-flattening which is what you would expect with higher growth and potentially higher inflation expectations. There’s a good argument that the markets have been already positioning for a Trump’s victory which is expected to strengthen the higher growth and less rate cuts expectations.
As previously mentioned, this is the trend for now and it’s generally a bad idea to fight such trends without a strong catalyst. Unfortunately, the JPY lacks bullish drivers as everything points to more weakening unless Harris wins the US elections, and we get a correction in Treasury yields and the US Dollar.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY bounced on the key 152.00 handle and extended the rally into a new high following the Japanese election result. The buyers will likely keep on looking for dip-buying opportunities on the lower timeframes as long as we stay above the 152.00 handle. The sellers, on the other hand, will want to see the price breaking below the 152.00 handle to start targeting the 149.40 level next.
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. The buyers will likely lean on the trendline to target new highs, while the sellers will want to see the price breaking below the trendline and the 152.00 handle to pile in for a pullback into the 149.40 level.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance zone around the 153.30 level. This is where we can expect the sellers to step in with a defined risk above the resistance to position for the break below the trendline. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Job Openings and the US Consumer Confidence report. Tomorrow, we get the US ADP and the US GDP. On Thursday, we have the US PCE, the US Jobless Claims and the US Employment Cost Index data. Finally, on Friday, we conclude the week with the US NFP and the US ISM Manufacturing PMI.
