Fundamental Overview
The USD rise stalled last week as the US government shutdown delayed many key US economic reports. The dollar “repricing trade” needs strong US data to keep going, especially on the labour market side, so any hiccup on that front is likely to keep weighing on the greenback. The market pricing is now back to 46 bps of easing by year-end and 112 bps by the end of 2026. This could still be too dovish, but we will need strong data to reprice.
In the absence of the government data, an October rate cut is now seen as a done deal. The reality is that an October cut was never really in question. It’s the December cut that could be priced out in case the data strengthens. We still have three NFP and two CPI reports before the December meeting.
On the JPY side, the victory of Takaichi over the weekend resulted in a big negative gap at the open for the yen as traders priced in more expansionary fiscal policy and a delay to rate hikes from the BoJ. The ball is now in the central bank’s court as traders will be focused on BoJ’s forward guidance.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY gapped higher at the open and extended the rally into new highs. The natural target should be the resistance around the 151.00 handle. That’s where we can expect the sellers to step in with a defined risk above the 151.20 level to position for a drop back into the major trendline. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 154.80 level next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have two support zones:
- A minor one around the 150.00 handle
- And a major one around the 148.50 level
The buyers will likely lean on those supports to keep pushing into new highs, while the sellers will look for downside breaks to target new lows.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the recent price action. There’s not much else we can add here as the sellers will likely step in around the 151.00-151.20 area, while the buyers will look for a breakout to target new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the Japanese wage growth data. On Thursday, we have Fed Chair Powell speaking and the US Jobless Claims figures (if the shutdown is lifted). On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.
