Fundamental Overview
The USD has been weakening across the board ever since Fed’s Williams endorsed a December rate cut. The greenback then extended the losses further following a series of soft US data that strengthened the case for a December cut.
The probability for a December cut is now at 86%, which makes it a done deal. Today, we get the US jobless claims data that are going to be the last important release before the FOMC decision on Wednesday. Unless we get big surprises, the data won’t change anything at this point.
At the end of the day, it’s all about the FOMC decision now and the following NFP and CPI reports.
On the JPY side, the currency has been gaining ground on the back of Governor Ueda’s comments on Monday in which he suggested that a rate hike could still be debated, although there was no clear hint to such a move.
Today, we got a Reuters “leak” citing government sources that the BoJ is likely to raise interest rates later this month. The market odds for a December hike jumped to 76% following the report giving the Japanese Yen another boost.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY broke below the upward trendline, opening the door for a pullback into the 153.50 support. The sellers piled in on the break and will keep on targeting the support zone. The buyers, on the other hand, should wait for the price to come into the support to position for a rally back into new highs with a better risk to reward setup.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor downward trendline defining the current pullback. The sellers will likely continue to lean on the trendline with a defined risk above it to keep pushing into the 153.50 support. The buyers, on the other hand, will look for a break higher to pile in for a rally into the 158.85 level next.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much we can add here, but we can see that the price broke below the 155.00 handle and it's now extending the drop as more sellers are piling in to target the 153.50 zone. As things stand, the sellers should have free room until the 153.50 support. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures, while tomorrow we conclude the week with the University of Michigan Consumer Sentiment report.
