Fundamental Overview
The USD weakened across the board in the first part of the week but managed to erase all the losses yesterday with an incredible rally. We haven’t got any catalyst for the move but there was no reason for the weakness at the start of the week either.
Fed speakers this week haven’t offered anything new and just reiterated that the labour market weakness “forced” them to move towards neutral. This means that if we were to get stronger labour market data, the Fed could start to turn more hawkish again and we might not get another cut in October of December.
Looking ahead, we have the US Jobless Claims report today and good data will likely give the greenback another boost. Weak data, on the other hand, could lead to a pullback. The biggest event will be the NFP report next Friday.
On the JPY side, the BoJ kept interest rates unchanged as expected last week 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.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is probing above the key resistance zone around the 148.50 level. This is where we can expect the buyers to increase the bullish bets into the 151.00 handle, while the sellers will look for the price to fall back below the resistance to pile in for a drop back into the major trendline.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor upward trendline defining the bullish momentum on this timeframe. If we get a pullback, the buyers will likely lean on the trendline with a defined risk below it to position for a rally into the 151.00 handle. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the major trendline next.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here but if the dollar’s momentum remains strong, we should see the buyers piling in on the break of the recent high at 148.92. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures. Tomorrow, we conclude the week with the Tokyo CPI and the US PCE report. Keep also an eye on Fed speakers.
