Fundamental
Overview
The USD eventually erased
all the CPI gains as the US inflation figures weren’t enough to trigger a more
hawkish repricing in interest rates expectations. The market is still expecting
roughly two rate cuts by year-end for the Fed. Overall, we are just in rangebound
mode given the lack of meaningful changes in conditions in the past few weeks.
On the JPY side, the ruling
bloc lost the majority in the upper house which makes striking a trade deal
with the US more complicated. Traders will now focus on how the political
landscape changes. Options include a new PM (although Ishiba said he will continue), new alliances and so on. The
key things to watch is how political shifts will change expectations for fiscal
policy and trade negotiations with the US.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY couldn’t sustain the rally above the key 148.30 resistance and eventually fell back below the
level. The sellers will likely keep on piling in around these levels with a defined
risk above the resistance to position for a drop into the 142.35 support. The
buyers, on the other hand, will want to see the price breaking above the
resistance again to start targeting the 151.20 level next.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we had an upward trendline defining the bullish momentum. The
price broke below the trendline, which might be a signal of a change in the
short-term trend. We have a minor support zone around the 147.00 handle which
the sellers will need to break through to increase the bearish bets into new
lows. The buyers, on the other hand, will likely keep on leaning on the support
to target new highs.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart,
there’s not much else we can add here as the buyers will look for dip-buying
opportunities around the support, while the sellers will look for a downside
breakout to push into new lows. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have Fed Chair Powell speaking
but given the blackout period, he won’t comment on monetary policy. On
Thursday, we get the Japanese and US Flash PMIs, and the latest US Jobless
Claims figures. On Friday, we conclude the week with the Tokyo CPI.
Watch the video below
This article was written by Giuseppe Dellamotta at investinglive.com.