USDJPY Technical Analysis – Watch the US data

US:

The Fed hiked by 25 bps as
expected and kept everything unchanged at the last meeting.
Fed Chair Powell reaffirmed their data dependency
and kept all the options on the table.
Inflation measures
since then showed further disinflation.
The labour market
displayed signs of softening although it remains fairly solid.
Overall, the economic data started to surprise to
the downside lately.
Last week the ISM Services PMI and Jobless Claims
surprised to the upside.
The Fed members are leaning more towards a pause in
September.
The market doesn’t expect the Fed to hike at the September
meeting, but there’s now a 50/50 chance of a hike in November.

Japan:

The BoJ kept everything unchanged as expected at the last meeting but
tweaked the YCC policy keeping the target band unchanged but giving more
flexibility with a hard cap at 1.00%.
The Japanese CPI data surprised to the upside
recently with the core-core reading reaching again the previous high.
The Unemployment Rate surprisingly jumped to 2.7%
recently, although it remains near cycle lows.
BoJ
Governor Ueda over the weekend said that his focus is on a quiet exit from
the monetary easing and added that the BoJ should have enough data by year end
to decide how to proceed.
The Japanese wage data last week showed a slowing in wage
growth, and this is something the BoJ focuses on particularly.

USDJPY Technical Analysis –
Daily Timeframe

On the
daily chart, we can see that the USDJPY fell to the upward trendline
and the red 21 moving
average following Ueda’s comments over the weekend. The price then bounced
back as the buyers leant on the trendline to position for another rally into
the highs. The sellers will need the price to break below the trendline to
switch the bias more to the downside and target new lower lows.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
downside gap at the open and the selloff into the trendline. The buyers then
piled in around the trendline and the 50% Fibonacci
retracement level to fade the selloff and target a new higher high. This is
still a buyers’ market with the 150.00 handle as the ultimate target.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a swing high around the 147.00 level. If the price breaks above it, we
will have a new higher high and the short-term market structure will turn
bullish again. That’s when we can expect more buyers to come into the market to
position for further upside.

Upcoming Events

This week we have many important events beginning with
the US CPI tomorrow, which is expected to show an increase in headline
inflation but further disinflation in the core measure. On Thursday, we will
see the latest US Jobless Claims, PPI and Retail Sales data. Finally on Friday,
we get the University of Michigan Consumer Sentiment report. Given that the
yield differentials is what is still driving the USDJPY higher, weak US data
should lead to a depreciation in the pair while strong data should lead to further
upside.