Fundamental Overview
The strong bullish momentum in the US Dollar waned a bit in this final part of the week as we got a pullback in Treasury yields. In fact, the main culprit for the US Dollar strength lately 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 this rally was a reflection of higher Trump’s winning odds.
For now, this is the trend, 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 couldn’t extend the rally and fell back to the 152.00 handle. The buyers will likely step in around this level with a defined risk below it to position for the continuation of the uptrend. The sellers, on the other hand, will want to see the price breaking lower to extend the pullback into the 149.40 level next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke below the upward trendline that was defining the bullish momentum on this timeframe. This could be a signal for a deeper pullback. The buyers will likely keep on stepping in between the 151.50 and 152.00 range, while the sellers will look for a break lower to target the 149.40 level next.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price today has already fell to the lower bound of its average daily range so there might not be much follow through in store for today and the market might just consolidate or bounce here.
Upcoming Catalysts
Today we have the US PCE, the US Jobless Claims and the US Employment Cost Index data. Tomorrow, we conclude the week with the US NFP and the US ISM Manufacturing PMI.