USDJPY Technical Analysis

USDJPY Fundamental Analysis

US

• The Fed left interest rates unchanged as expected at the last meeting.
• The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
• Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
• The US Core PCE last week came in line with expectations, so the market’s pricing barely changed.
• The labour market remains pretty resilient but we are starting to see some weakness as Continuing Claims missed expectations once again last week pointing to an upward trend.
• The US Retail Sales recently beat expectations by a big margin with positive revisions to the prior figures, suggesting the consumers’ spending remains solid.
• The recent US PMIs showed that the economy now looks more balanced.
• The US Employment Cost Index yesterday showed that wage growth picked up in Q3.
• The US Consumer Confidence fell for the third consecutive month although the data beat expectations.
• Fed Chair Powelland other FOMC members continue to highlight the rise in long term yields as doing the job for the Fed and therefore they are expected to keep rates steady this week.
• The market doesn’t expect the Fed to hike anymore.

Japan

• The BoJ kept its monetary policy basically unchanged but formally widened the YCC to 1% on the 10-year JGBs stating that it will be a reference cap.
• Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed and that they are not foreseeing sustainable price increases.
• The recent Japanese CPIshowed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
• The Unemployment Rate last month remained unchanged near cycle lows.
• The Japanese Manufacturing PMI matched the prior reading remaining in contraction with the Services PMI falling but holding on in expansion.
• The latest Japanese wage data missed expectations again which is unlikely to lead to a more hawkish BoJ in the near future.
• The Tokyo CPI, which is seen as a leading indicator for National CPI, beat expectations last week.
• The market expects the BoJ to keep interest rates unchanged at the next meeting as well.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that the USDJPY pair eventually managed to break decisively the 150.00 level as the BoJ disappointed, and we got a report that the BoJ hasn’t intervened in the prior month. This news gave the buyers more confidence to push above the key level and extend the rally into the cycle high around the 152.00 level. We can also notice that the divergence with the MACD is now massive, and we are even around an important level. In such instances, it takes just one notable fundamental catalyst to change the entire trend, so the market participants will be on alert.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see the strong rally from yesterday when the pair just kept on going up with no pullback. The sellers are likely to start stepping in around these levels with a defined risk above the cycle high as the risk to reward in case the pair reverses the trend would be massive. The buyers, on the other hand, are likely to lean on the previous swing high around the 150.70 level where we can also find the 38.2% Fibonacci retracement level for confluence.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more closely the setup for the buyers with the moving averages starting to roll over as the sellers continue to step in. A break below the support zone should see the sellers increasing their bearish bets. Watch out for the US labour market data this week as we might get a complete reversal in case the figures disappoint.

Upcoming Events

This week, we will get lots of tier one data points with the US labour market and the FOMC decision in focus. Today we will get the US ADP, the ISM Manufacturing PMI, the Job Openings data and the FOMC rate decision. Tomorrow, we will see the US Jobless Claims data, while on Friday we conclude the week with the US NFP report and the ISM Services PMI.

See the video below