Fundamental Overview
The USD continues to be under pressure as the positive tariffs talks on Monday eased the trade war fears and weighed on the greenback. In fact, trade war fears have been the only thing keeping the bid under the USD as interest rate expectations and economic data took the second place in importance.
As a reminder, the repricing in rate cuts expectations reached the peak after the last US NFP report and then the market returned into a dovish pricing following the benign US inflation data (the market is still pricing roughly two rate cuts for 2025).
Today, we get the January NFP and it could be another good report. That might lead to a short-term relief rally for the US Dollar but as we've seen with the US Job Openings data, the labour market continues to normalise and it's not a source of inflationary pressures anymore. So, the potential US Dollar rally might be faded.
That doesn't mean that the Fed will cut more than the two times projected for this year, but it also doesn't call for a more hawkish repricing yet. So, the path of least resistance for the US Dollar (barring negative tariffs outcomes) might remain to the downside as a more dovish path going forward looks more probable.
On the JPY side, this week we got the Japanese wage data which beat expectations by a big margin and gave the yen a strong boost as the market increased the bets for a potential third hike this year. We’ve also got some hawkish comments from BoJ officials which kept the bullish momentum going in the yen.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY extended the drop into the 151.00 handle following the strong Japanese wage data and the hawkish comments from BoJ officials. The target for the sellers remains the swing low around the 149.00 handle. There’s not much here where the buyers or sellers can lean onto as the only notable resistance stands around the 154.00 handle.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is testing the lower low around the 151.82 level. The sellers might step in here with a defined risk above the level to extend the drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to position for a deeper pullback into the 152.88 level next.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much we can add here as the sellers will look for short opportunities around the 151.82 and 152.88 level, while the buyers will look for breaks to position for new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US NFP report.
