Fundamental
Overview
The USD extended the gains
further in the past days following strong US data and a slightly more hawkish
Fed Chair Powell. The US ADP and Q2 GDP surprised both to the upside and Fed Chair
Powell didn’t open the door for a cut in September as was expected but dodged
the questions by saying that they would look at the totality of the data.
This has caused a hawkish
repricing in interest rates expectations with the market now seeing 35 bps of
easing by year-end compared to 47 bps before the data and Powell’s speech. The
focus today will be on the US NFP report. Fed Chair Powell mentioned that they
are focused on the unemployment rate, so that’s going to be the one to watch.
On the JPY side, the BoJ left
interest rates unchanged and revised inflation forecasts higher as expected. The
yen didn’t move much on the decision but was then sold across the board as Governor
Ueda downplayed inflation risks and didn’t sound concerned about the exchange
rate at all.
For more JPY appreciation
we will likely 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 broke through the key resistance zone around the 148.30 level and
extended the gains into the 151.00 handle. The sellers will likely step in
around these levels with a defined risk above the 151.20 swing point to
position for a pullback into the 148.30 level. The buyers, on the other hand,
will look for a break higher to increase the bullish bets into the 155.00
handle next.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have an upward trendline
defining the bullish momentum. If we get a pullback into the trendline, we can
expect the buyers to lean on it to position for a rally into new highs. The
sellers, on the other hand, will look for a break lower to increase the bearish
bets into the 142.35 level next.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have another minor upward trendline defining the bullish momentum
on this timeframe. The buyers will likely continue to lean on the trendline
with a defined risk below it to keep pushing into new highs. The sellers, on the
other hand, will look for a break lower to extend the pullback into the next
trendline. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we conclude the week with the US NFP report and the
US ISM Manufacturing PMI.
Watch the video below
This article was written by Giuseppe Dellamotta at investinglive.com.