FUNDAMENTAL OVERVIEW
USD:
Last week, we got a hot US NFP report and slightly soft US
CPI data. The market firmed up rate cut bets with 62 bps of easing seen by
year-end. Overall, the data doesn’t really point in that direction, but we will
need to see more of it to confirm or deny the market pricing.
Given the negligible changes
to the big picture after all the data, the US dollar remained mostly rangebound
with mixed performance against the major currencies. The future outlook will
still be guided by the evolution of the data.
This week, all the important stuff will be released on Friday as we get the US Flash PMIs and the Q4 GDP. We might also get the US Supreme Court decision on Trump’s tariffs.
JPY:
On the JPY side, we’ve seen
a big “sell the fact” trade following the widely expected Takaichi’s victory in
the lower house elections, but other than that, nothing has changed. In fact,
the data hasn’t been supporting urgent rate hikes, and we haven’t got anything
new from the central bank either. As a reminder, the BoJ held interest rates steady
as expected at the last policy meeting and upgraded slightly growth and
inflation forecasts due to the expansionary fiscal policies.
Governor Ueda didn’t offer
anything new in terms of forward guidance as he just repeated that they will
keep raising rates if the economic outlook is realised. He also added that
April price behaviour will be a factor to mull over a rate hike. This suggests
that April is when they expect to deliver another rate hike if the data
supports such a move.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPY is consolidating at the major
trendline. The buyers continue to step in there with a defined risk below the trendline
to position for a rally back into the 159.00 handle. The sellers, on the other
hand, will want to see the price breaking lower to open the door for a drop
into the 150.00 handle next.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see more clearly the rangebound price action near the trendline. There’s not
much else we can add here, so we need to zoom in to see some more details.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see two key swing levels defining the downtrend. The first one around the
153.70 level defines the consolidation. A break above it should see the buyers
increasing the bullish bets into the next swing level at 154.65. The sellers,
on the other hand, will likely step in around the 153.70 resistance with a
defined risk above it to keep targeting a break below the major trendline. The
red lines define the average daily range for today.
UPCOMING CATALYSTS
On Wednesday we have the FOMC Meeting Minutes. On Thursday, we get
the latest US Jobless Claims figures. On Friday, we conclude the week with the
Japanese CPI, the US Q4 GDP, the US PCE price index for December, the US Flash
PMIs and a potential US Supreme Court decision on Trump’s tariffs.
This article was written by Giuseppe Dellamotta at investinglive.com.