Fundamental
Overview
The USD remains under
pressure against most major currencies although the fundamental backdrop
remains unclear. The most popular narrative is that everyone is selling US
assets, and the greenback is losing its reserve status as a consequence of the
aggressive trade war.
Such big claims are
generally made at near term tops or bottoms, so it calls for caution. Anyway, that’s the
trend for now and we will need some catalyst to reverse it. Maybe positive news
on trade negotiations front could see the market scale back the rate cut
expectations for the Fed and provide a relief rally for the greenback.
For now, we got just a couple of disappointing headlines with the US banning the sale of Nvidia chips to China and European officials suggesting that the tariffs could stay as negotiations stall. We will see how things will evolve in the next days and weeks.
On the JPY side, the
currency has been driven mainly by global events rather than domestic
fundamentals. It’s been supported more by the risk-off flows rather than
interest rates expectations as the market doesn’t see the BoJ hiking rates
anymore this year. In fact, BoJ
Governor Ueda today sounded like more tightening now is out of question and
the central bank might even resort to some easing in case things deteriorate
further.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can
see that USDJPY continues its downward trajectory towards the 140.00 handle. If
the price gets there, we can expect the buyers to step in with a defined risk
below the level to position for a rally back into the major trendline. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into new
lows.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see that the price rolled back to the 142.05 low as the selling pressure returned.
From a risk management perspective, the sellers will have a better risk to
reward setup around the 144.56 level to position for further downside. The
buyers, on the other hand, will want to see the price breaking above the 144.56
level to start targeting a bigger pullback into the 148.25 level next.
USDJPY Technical
Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can
see that the recent low around the 142.00 handle has been holding up pretty
well. This is where we can expect the buyers to step in with a defined risk
below the level to position for a pullback into the 144.56 level. The sellers,
on the other hand, will look for a break lower to increase the bearish bets
into the 140.00 handle next. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US Retail Sales and Fed
Chair Powell speaking. Tomorrow, we get the latest US Jobless Claims figures,
while on Friday we conclude the week with the Japanese CPI. As a reminder, the
market is focused on tariff negotiations at the moment, so the data is not as
market-moving as it used to be in the past months.
