Fundamental Overview
The USD has been weakening across
the board ever since Fed’s Williams endorsed a December rate cut. The greenback
then extended the losses further last week following soft ADP data and a Bloomberg
report saying that Hassett emerged as the frontrunner for the Fed Chair
position.
The probability for a
December cut is now at 92%, which makes it a done deal. We won’t get much data
before the FOMC meeting, so the focus will likely be mainly on jobless claims
and ADP data, which haven’t been showing any strong improvement.
Weak data should keep
weighing on the greenback, while strong data could provide some short-term reprieve.
At the end of the day though, it’s all about the FOMC decision now and the
following NFP and CPI reports.
On the JPY side, the
currency has been gaining some ground on the back of Governor
Ueda’s comments in which he suggested that a rate hike could still be
debated, although there was no clear hint to such a move.
The BoJ is focused
primarily on wage negotiations, and they are trying to get enough data before
the upcoming meeting to decide whether an earlier than expected rate hike is
warranted or more time is needed to get a better view. The market is now pricing
a 36% chance of a rate hike at the December meeting.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY broke below the upward trendline, opening the door for a
pullback into the 153.50 support. The sellers piled in on the break and will
keep on targeting the support zone. The buyers, on the other hand, should wait
for the price to come into the support to position for a rally back into new
highs with a better risk to reward setup.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a minor downward trendline defining the current pullback. The
sellers will likely continue to lean on the trendline with a defined risk above
it to keep pushing into the 153.50 support. The buyers, on the other hand, will
look for a break higher to pile in for a rally into the 160.00 handle.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a minor resistance around the 155.66 level where the price
reacted from several times in the past days. If we were to get a pullback into
this resistance, we can expect the sellers to step in with a defined risk above
it to position for a drop into the support. The buyers, on the other hand, will
look for a break higher to extend the pullback into the trendline next. The red
lines define the average daily range for today.
Upcoming
Catalysts
Today we get the US ISM Manufacturing PMI. On Wednesday, we have the US ADP
and the US ISM Services PMI. On Thursday, we get the latest US Jobless Claims figures.
On Friday, we conclude the week with the University of Michigan Consumer Sentiment
report.
This article was written by Giuseppe Dellamotta at investinglive.com.