Fundamental Overview
The USD has strengthened since Friday as Treasury yields bounced following some positive Trump’s comments on China. Overall, the US dollar performance has been mixed as markets have been driven by quick changes in risk sentiment given the lack of US data.
On the domestic side, the US government shutdown continues to delay many key US economic reports. This Friday though, we will get the US CPI data since it’s crucial for social security benefits adjustment required by November.
The dollar “repricing trade” needs strong US data to keep going, especially on the labour market side, so any hiccup on that front should keep weighing on the greenback. Since Trump’s threat of massive tariffs on China, the market pricing turned more dovish with 126 bps of easing seen by the end of 2026 (the Fed projected just 75 bps).
On the JPY side, the currency strengthened recently on the risk-off sentiment that got triggered by Trump’s tariffs threat but eventually gave back most of the gains as things de-escalated. Domestically, Takaichi became Prime Minister, and we saw some more weakness in the yen as traders continue to expect the BoJ to delay rate hikes. In fact, the probabilities for a rate hike by year-end slipped to just 40%.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY managed to rally back above the major support zone around the 151.00 handle. If we get a pullback, we can expect the buyers to step in again around the support with a defined risk below it to position for a rally into the 153.00 handle. The sellers, on the other hand, will want to see the price breaking lower to pile in for a drop into the 148.50 support next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have an upward trendline adding confluence to the support zone. That’s where we can expect the buyers to step in with a defined risk below those key level to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to start targeting the 148.50 support next.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as buyers will look for a bounce around the support, while the sellers will look for a downside breakout. The red lines define the average daily range for today.
Upcoming Catalysts
On Friday, we will get the US CPI report and the US flash PMIs.
