Fundamental Overview
The USD extended the gains further in the past days following strong US data and a slightly more hawkish Fed Chair Powell. The US ADP and Q2 GDP surprised both to the upside and Fed Chair Powell didn’t open the door for a cut in September as was expected but dodged the questions by saying that they would look at the totality of the data.
This has caused a hawkish repricing in interest rates expectations with the market now seeing 35 bps of easing by year-end compared to 47 bps before the data and Powell’s speech. The focus today will be on the US NFP report. Fed Chair Powell mentioned that they are focused on the unemployment rate, so that’s going to be the one to watch.
On the JPY side, the BoJ left interest rates unchanged and revised inflation forecasts higher as expected. The yen didn’t move much on the decision but was then sold across the board as Governor Ueda downplayed inflation risks and didn’t sound concerned about the exchange rate at all.
For more JPY appreciation we will likely need weak US data to increase the dovish bets on the Fed or higher inflation figures for Japan to price in more rate hikes than currently expected. Other potential positive driver could be signs of more fiscal support as that will likely put upward pressure on inflation.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY eventually broke through the key resistance zone around the 148.30 level and extended the gains into the 151.00 handle. The sellers will likely step in around these levels with a defined risk above the 151.20 swing point to position for a pullback into the 148.30 level. The buyers, on the other hand, will look for a break higher to increase the bullish bets into the 155.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have an upward trendline defining the bullish momentum. If we get a pullback into the trendline, we can expect the buyers to lean on it to position for a rally into new highs. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 142.35 level next.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another minor upward trendline defining the bullish momentum on this timeframe. The buyers will likely continue to lean on the trendline with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to extend the pullback into the next trendline. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US NFP report and the US ISM Manufacturing PMI.
