Fundamental Overview
The USD has been weak across the board in the first part of this week with quarter-end flows and US government shutdown likely weighing on the price action. In fact, given the delay in the publishing of key US data like the NFP and potentially even the CPI, there’s very low probability of the Fed skipping a rate cut in October. The market as a result priced out some of the hawkishness from last week and increased the dovish bets on the soft US ADP report.
The dollar “repricing trade” needs strong US data to keep going, especially on the labour market side, so any hiccup on that front is likely to keep weighing on the greenback. The market pricing is now back to 47 bps of easing by year-end and 114 bps by the end of 2026. This could still be too dovish but we will need strong data to reprice. The lack of key releases might keep the market mostly rangebound with traders waiting for new catalysts.
On the JPY side, we haven’t got any meaningful change in fundamentals in the meantime. The BoJ kept interest rates unchanged as expected at the last meeting, but the market got surprised by two members voting for a rate hike. The yen initially rallied but once Governor Ueda started speaking, the gains began to fade and eventually got erased completely as Ueda downplayed the dissenting votes. The yen has been driven mostly by dollar weakness/strength.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY fell all the way back to the major trendline where we got a bounce just before hitting the trendline. This is where we buyers will likely continue to pile in with a defined risk below the trendline to position for a rally into the 151.00 handle. The sellers, on the other hand, will look for a break below the trendline to position for a drop into the 144.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a downward trendline defining the bearish momentum. The buyers piled in on the break to position for a rally into the 148.50 resistance. We now have a minor support zone around the 147.25 level. The buyers will likely step in around the support with a defined risk below it to keep targeting the resistance. The sellers, on the other hand, will look for a break lower to pile in for a drop into the major trendline targeting a break below it.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the recent price action. There’s not much else we can add here as the buyers will likely step in around the support, while the sellers will look for a break lower to pile in for new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with US ISM Services PMI. Keep also an eye on Fed speakers.
