Fundamental
Overview
The USD has been supported
across the board in the first half of the month as the positive news on the
trade front triggered a more hawkish repricing in interest rates expectations. Once
the market got back in line with the Fed’s baseline of two rate cuts in 2025,
the greenback lost that support and began to weaken again.
For further gains, the US
Dollar will need either strong economic data to make the market to price out the
rest of the rate cuts expected by year-end or weak data from its peers to make
the divergence with the Fed stronger.
On the JPY side, the
currency has been supported recently by the surge in long term Japanese yields
as repatriation flows likely boosted the famous safe haven. Market participants
were calling for some kind of intervention before things could get uglier.
Sure enough, yesterday we
got the news
that Japan was considering trimming the issuance of super-long bonds. That was
enough to calm the markets, and we saw yields and the Japanese Yen falling
pretty quickly.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can
see that USDJPY bounced around the most recent swing low at 142.35 and extended
the move to the upside following the Japanese bond market news. There’s not
much we can glean from this timeframe, so we need to zoom in to see some more
details.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see that the price broke above the downward trendline that was defining the
bearish momentum and the resistance zone around the 143.00 handle. If the price
comes back to retest the resistance now turned support, we can expect the
buyers to step in with a defined risk below the support to position for a rally
into the 148.32 level. The sellers, on the other hand, will want to see the
price breaking lower to start targeting the 140.00 handle again.
USDJPY Technical
Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can
see that we have a minor support zone around the 143.85 level. From a risk management
perspective, the buyers will have a better risk to reward setup around the minor
support to position for further upside, while the sellers will look for a break
lower to pile in for a deeper pullback into the 143.00 handle. The red lines
define the average daily range for today.
Upcoming
Catalysts
Today, we have the FOMC Meeting Minutes. Tomorrow, we get
the latest US Jobless Claims figures. On Friday, we conclude the week with the
Tokyo CPI, the US PCE price index and the final UMich Consumer Sentiment
report.
Watch the video below
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