FUNDAMENTAL OVERVIEW
USD:
Last week, we got a hot US NFP report and slightly soft US CPI data. The market firmed up rate cut bets with 62 bps of easing seen by year-end. Overall, the data doesn’t really point in that direction, but we will need to see more of it to confirm or deny the market pricing.
Given the negligible changes to the big picture after all the data, the US dollar remained mostly rangebound with mixed performance against the major currencies. The future outlook will still be guided by the evolution of the data.
This week, all the important stuff will be released on Friday as we get the US Flash PMIs and the Q4 GDP. We might also get the US Supreme Court decision on Trump's tariffs.
JPY:
On the JPY side, we’ve seen a big “sell the fact” trade following the widely expected Takaichi’s victory in the lower house elections, but other than that, nothing has changed. In fact, the data hasn’t been supporting urgent rate hikes, and we haven’t got anything new from the central bank either. As a reminder, the BoJ held interest rates steady as expected at the last policy meeting and upgraded slightly growth and inflation forecasts due to the expansionary fiscal policies.
Governor Ueda didn’t offer anything new in terms of forward guidance as he just repeated that they will keep raising rates if the economic outlook is realised. He also added that April price behaviour will be a factor to mull over a rate hike. This suggests that April is when they expect to deliver another rate hike if the data supports such a move.
USDJPY TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDJPY is consolidating at the major trendline. The buyers continue to step in there with a defined risk below the trendline to position for a rally back into the 159.00 handle. The sellers, on the other hand, will want to see the price breaking lower to open the door for a drop into the 150.00 handle next.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the rangebound price action near the trendline. There’s not much else we can add here, so we need to zoom in to see some more details.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see two key swing levels defining the downtrend. The first one around the 153.70 level defines the consolidation. A break above it should see the buyers increasing the bullish bets into the next swing level at 154.65. The sellers, on the other hand, will likely step in around the 153.70 resistance with a defined risk above it to keep targeting a break below the major trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On Wednesday we have the FOMC Meeting Minutes. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the Japanese CPI, the US Q4 GDP, the US PCE price index for December, the US Flash PMIs and a potential US Supreme Court decision on Trump’s tariffs.
