Fundamental
Overview
The USD has been marginally
weaker against the major currencies recently due to lower than expected US
inflation figures last week that sent Treasury yields lower and made the market
to price in higher chances of a second rate cut by the end of the year.
We’ve also got lots of
whipsaws in the last couple of days caused by Trump’s tariffs headlines. That’s
been keeping the volatility high this week despite the lack of key economic
reports.
Overall, it seems like the
market is optimistic about tariffs and the news that Trump is
considering a 10% tariff on China might be a signal that he won’t be as aggressive as promised during his
campaign given that back then he talked about 60% tariff on China.
On the JPY side, nothing
has changed as the market continues to expect a 25 bps rate hike tomorrow with
the probabilities now standing around 95%. The yen has been weak throughout the
week as there might be some profit taking ahead of the BoJ decision given that
a disappointment could lead to a quick selloff in the JPY.
The focus will be on
forward guidance. The market already expects another rate hike by the end of
the year, so we will need the central bank to open the door for even more hikes
or some risk off in the market to trigger more JPY gains.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY has been basically consolidating since last Friday as the
market awaits the BoJ decision tomorrow. From a risk management perspective,
the buyers will have a better risk to reward setup around the major trendline to position for a rally into the
160.00 handle. The sellers, on the other hand, will look for a break below the
trendline to extend the drop into the 149.00 handle next.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that the price broke above the downward trendline that was defining the bearish
momentum. The buyers will likely pile in around these levels to position for a
rally into the 160.00 handle, while the sellers will look for a drop back below
the trendline to target the major trendline.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that the price is trading around the resistance zone. We have a minor
upward trendline defining the current bullish momentum on this timeframe. The
buyers will likely continue to lean on it to keep targeting new highs, while
the sellers will look for a break lower to position for a drop into the major
trendline around the 154.50 level. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we get the latest US Jobless Claims
figures, while tomorrow we conclude the week with the Japanese CPI, the BoJ
Rate Decision and the Flash PMIs.
Watch the video below
This article was written by Giuseppe Dellamotta at www.forexlive.com. Source