FUNDAMENTAL OVERVIEW
USD:
The US Dollar spiked higher yesterday following a strong US NFP report as the market pared back slightly Fed rate cut bets but surprisingly gave back all the gains. Maybe the market is still too convinced of more labour market weakness to come, or it decided to wait for the US CPI. Whatever the reason, the data since the start of the year has been clearly pointing to improving conditions that do not justify further rate cuts.
The focus now turns to the US CPI report coming up tomorrow. If we get hot data, I can’t see how the market could brush that off like it did with the NFP. The hawkish repricing will likely be more substantial and trigger a more sustained rally in the greenback. On the other hand, soft data shouldn’t change much in terms of market pricing but could keep the dollar under pressure.
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 fell all the way back to the major trendline. We can expect the buyers to step in around these levels with a defined risk below the trendline to position for a rally into the 159.00 handle. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 145.00 level next.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the strong support at the 152.00 handle where we can find the confluence of the January low and the major trendline. Again, this is where we can expect the buyers to step in to position for new highs, while the sellers will look for a break to extend the drop into new lows.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see a minor downward trendline defining the bearish momentum. The sellers will likely continue to lean on the trendline with a defined risk above it to keep pushing into new lows, while the buyers will look for a break higher to increase the bullish bets into the 159.00 level next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the US Jobless Claims figures, while tomorrow we conclude the week with the US CPI report.
