Fundamental Overview
The USD performance has been mixed in the past days but still on net negative despite the decreasing December rate cut odds. It looks like the stock market is what has been driving all other markets.
In fact, when the stock market had positive days, we’ve seen Treasury yields and the US dollar rising, but when stocks performed poorly, Treasury yields and the greenback gave back the gains. The market might be thinking that a selloff in the stock market is going to weigh significantly on the economy, eventually requiring the Fed to cut more or more aggressively.
The focus now is of course on the Fed and the US data ahead of the December FOMC meeting. The market pricing is now showing just a 42% chance of a cut in December, so the data will have the final say.
I don't think the September NFP on Thursday is going to matter much if it's soft given that it's old data, but a strong report might be taken as meaningful because the market could think that conditions were already getting better in September before the two rate cuts.
Therefore, I think the November NFP is going to have the final say, which will hopefully get released just before the FOMC meeting in December (we won't get the November CPI in time).
On the JPY side, nothing has changed. The currency has been weakening since the last BoJ policy decision where the central bank left interest rates unchanged as expected with again two dissenters voting for a hike.
There were no surprises but Governor Ueda focusing on spring wage negotiations suggested that the next hike could be delayed to January or even March 2026. The probabilities for a December hike stand around 25%.
We continue to get verbal interventions from the Japanese Finance Minister around the 155.00 handle, but the market got used to it, so it will take some stronger action to reverse the momentum.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY is trading above the 155.00 handle. The buyers will likely continue to pile in for new highs as long as the price stays above the 155.00 level. The sellers, on the other hand, will want to see the price falling back below the key level to position for a drop into the 151.00 support.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have an upward trendline defining the bullish momentum. If we get a pullback into it, we can expect the buyers to lean on the trendline with a defined risk below it to position for a rally into new highs. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 151.00 support.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much we can add here although we can expect the sellers to increase the bearish momentum on a break below the 154.80 level. On the other hand, a break above the recent high at 155.38 should see the buyers increasing the bullish bets into the 156.00 handle next. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the weekly ADP jobs data. Tomorrow, we have the FOMC meeting minutes. On Thursday, we get the September NFP report and maybe the US Jobless Claims data. On Friday, we conclude the week with the Japanese CPI report and the US Flash PMIs.
