Fundamental
Overview
The USD sold off across the
board on Friday following a softer than expected NFP
report. Overall, the data wasn’t as bad as one might think by just looking at
the reaction but given that we were positioned for a strong report and the
pricing got more hawkish after the Fed’s decision, the weaker data was enough
to trigger a quick repricing.
In fact, the market is now
pricing 59 bps of easing by year-end compared to just 35 bps before the NFP
release. That’s a pretty quick change of heart. Over the weekend, we had Fed’s
Williams opening the door for a cut in September and yesterday, Fed’s
Daly echoed such sentiment. The NFP clearly made them a bit more worried,
and a September cut is now basically a done deal.
It’s highly likely that
more benign data will see Fed Chair Powell opening the door for a cut in
September at the Jackson Hole Symposium.
On the JPY side, we haven’t
got anything new since the BoJ left interest rates unchanged and revised
inflation forecasts higher as expected at the last meeting. The yen, after some
depreciation caused by dovish Governor Ueda’s comments, rallied strongly on the
back of the soft NFP report and the dovish repricing for the Fed.
For more JPY appreciation
we will need weak US data to increase the dovish bets on the Fed or higher
inflation figures for Japan to price in more rate hikes than currently
expected. Other potential positive driver could be signs of more fiscal support
as that will likely put upward pressure on inflation.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY eventually sold off from the key resistance zone around 151.00 handle. The
target for the sellers should be the major trendline
around the 144.50 level. That’s where we can expect the buyers to step in with
a defined risk below the trendline to position for a rally back into the
resistance.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that the price is trading just below the upward trendline that was defining
the bullish momentum. We can expect the sellers to pile in around these levels
with a defined risk above the trendline to keep pushing into the 145.86 level.
The buyers, on the other hand, will want to see the price rising back above the
trendline to invalidate the bearish setup and target a move back into the resistance.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we could have a minor resistance around the most recent swing high at
the 148.00 handle. If the price gets there, we can expect the sellers to lean
on it with a defined risk above it to position for a drop into the 145.86 level
with a better risk to reward setup. The buyers, on the other hand, will look
for a break higher to increase the bullish bets into the 151.00 resistance. The
red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US ISM Services PMI and
on Thursday, we get the latest US Jobless Claims figures.
Watch the video below
This article was written by Giuseppe Dellamotta at investinglive.com.