FUNDAMENTAL OVERVIEW
USD:
The US dollar has been trading
mostly sideways after the hot US NFP report and the slightly soft US CPI data of last week. The market firmed up rate
cut bets with 60 bps of easing seen by year-end but overall, the data didn’t
really change anything in the bigger picture.
The bearish positioning in the
US dollar remains crowded, so it’s hard to see much more weakness unless the
data deteriorates significantly or we get some kind of negative shock in the
economy. This week, all the important stuff will be released on Friday as we
get the US Flash PMIs and the US 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 continues to consolidate near
the major trendline as traders await new catalysts to pick a direction. If we get
a test of the trendline, we can expect the buyers to lean on the trendline with
a defined risk below it to position for a rally 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 146.00 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 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 continues to 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
Today we have the FOMC Meeting Minutes. Tomorrow, 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 the
potential US Supreme Court decision on Trump’s tariffs.
This article was written by Giuseppe Dellamotta at investinglive.com.