KEY POINTS:
- US dollar continues to bounce around as traders await the NFP report
- US data this week came out mixed
- Japanese wage data disappointed with traders slightly paring back rate hike bets
- USDJPY price action remains rangebound as we await new catalysts
FUNDAMENTAL OVERVIEW
USD:
The US dollar has been bouncing around in the past few days as traders continue to wait for the US NFP report. The US data this week has been mixed. We got a soft ISM Manufacturing PMI on Monday but a strong Services PMI yesterday. The ADP was good despite a slight miss, but Job Openings were soft.
In terms of macro, nothing has changed. The market is still pricing 62 bps of easing by year-end with 57% probability of a Fed cut coming in March at the earliest. We will need very soft NFP and CPI data to force the Fed to cut at the upcoming meeting, otherwise traders will just adjust the timing of the expected cuts in 2026 and might even increase bets in the case of weak data.
Tomorrow, the US Supreme Court scheduled an “opinion day”, so we might also potentially get a decision on Trump’s tariffs.
JPY:
On the JPY side, the economic data hasn’t been pointing to any urgent action from the BoJ. The latest wage data disappointed and the Tokyo CPI in December was softer than expected. Inflation has been hovering above the BoJ’s 2% target but never showed concerning developments.
The central bank is still placing a great deal on wage growth, so wage data and spring wage negotiations remain key. The market is now pricing 36 bps of tightening this year following the soft wage data, and if we continue to see weakness in the data, we could end up with no hikes at all.
USDJPY TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that we have a strong support zone around the 154.50 level where the price got rejected from several times in the past weeks. From a risk management perspective, the buyers will have a better risk to reward setup around the support to position for a rally into the 160.00 handle next. The sellers, on the other hand, will want to see the price breaking lower to pile in for a drop into the major trendline around the 151.00 level.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that we’ve had a messy price action lately, not giving us any clear level where to lean on. We have a minor upward trendline that could act as support. The buyers will likely step in there with a defined risk below the trendline to position for a rally into new highs, while the sellers will look for a break lower to increase the bearish bets into the 154.50 support.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we’ve been trading inside what looks like a broadening wedge. The price action this week has been contained in a rising channel. The buyers will likely continue to step in around the bottom trendline to keep pushing into the top of the wedge, while the sellers will look for a break lower to extend the pullback into the bottom of the wedge. 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 US NFP report and potential US Supreme Court decision on Trump’s tariffs.
