Fundamental Overview
The USD strengthened across the board yesterday following a hawkish comment from Fed Chair Powell. In fact, the Fed decision was in line with expectations but the only thing that mattered is one line from Powell saying “a December cut is not a foregone conclusion – in fact, far from it”.
He repeated that a few times suggesting that there’s really a strong debate within the FOMC. Remember that the neutral and hawkish members outnumber the dovish members easily. Of course, everything is conditional to the data, but Powell also added that in case they don’t get the data, they might as well skip the December cut.
We saw bit of a hawkish repricing in interest rate expectations with the December probability falling to 70% vs 90% before Powell’s speech. The total easing by the end of 2026 shows 87 bps which is still too dovish compared to 50 bps expected by the Fed.
On the JPY side, the currency weakened across the board as the BoJ left interest rates unchanged as expected with again two dissenters voting for a hike. There were no surprises. BoJ governor Ueda offered limited forward guidance as he mostly repeated the same stuff highlighting trade uncertainty and focus on spring wage negotiations. The market pricing turned a little bit more dovish as the probability for a December hike fell to just 26% with the next hike expected in March 2026 at the earliest.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is breaking above the resistance around the 153.25 level where we have the confluence of the previous high and the top trendline. The buyers likely increased the bullish bets to target a move into the 154.80 level next. The sellers, on the other hand, will want to see the price falling back below the resistance to step back in and position for a pullback into the 151.00 support.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the current breakout. There’s not much else we can add here as the buyers piled in on the breakout to target the 154.80 level, while the sellers will look for a fall back below the resistance to position for a pullback.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a couple of upward trendlines defining the bullish momentum. If the price gets there, we can expect the buyers to lean on the trendlines with a defined risk below them to position for a rally into new highs. The sellers, on the other hand, will look for downside breaks to increase the bearish bets into the 151.00 support. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we conclude the week with the Tokyo CPI.
