Fundamental Overview
The USD came under some pressure at the start of last week following the US CPI report as the data came mostly in line with expectations. In the following days though, we got some hottish data with the US PPI beating expectations by a big margin, the US Jobless Claims improving further and the inflation expectations in the UMich survey surprising to the upside.
Overall, we ended the week basically flat on the US dollar as the aggressive dovish expectations on the Fed got trimmed a bit. Nevertheless, given the overreaction from the Fed members to the last soft NFP, a September cut looks unavoidable now and only a hot NFP report in September might get us to a 50% probability (although it would certainly diminish expectations for rate cuts after the September one).
The focus has now switched to Fed Chair Powell’s speech at the Jackson Hole Symposium on Friday. Traders will be eager to see if he changes his stance as well. Most likely though, he won’t pre-commit to anything and just reiterate that they will decide based on the totality of the data.
On the JPY side, the currency has been rallying on the back of the dovish expectations for the Fed. For more JPY appreciation we will 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. Another 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 is still consolidating below the 148.50 level as the market participants await new catalysts to pick a direction. The sellers will likely continue to step in around the 148.50 resistance to keep targeting the major trendline around the 145.50 level, while the buyers will look for a break higher to pile in for a rally into the 151.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price action has been pretty choppy, so there’s no need to force anything between the 148.50 resistance and the swing low at 145.86 level. This week will likely be more about patience than trading as we await Fed Chair Powell’s speech and then the NFP report in September.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline defining the current bullish momentum on this timeframe. On an intraday basis, the buyers will likely continue to lean on the trendline to keep pushing into new highs, while the sellers will look for a break lower to target the 145.86 level. The red lines define the average daily range for today.
Upcoming Catalysts
This week is going to be more about Fed speakers than economic data. We begin with Fed’s Bowman tomorrow. On Wednesday, we have the Fed’s Waller and the FOMC meeting minutes. On Thursday, we get the Japanese and US Flash PMIs as well as the US Jobless Claims figures. Finally, on Friday, we conclude the week with Japanese CPI and Fed Chair Powell speech at the Jackson Hole Symposium.
