Fundamental
Overview
The USD regained some
ground in the final part of last week and extended the gains this week, although
we haven’t got any meaningful catalyst for the move. Overall, we continue to
range as the market is waiting for something new for the next sustained trend.
Given that the “short US
dollar” is now the most crowded trade, such quick unwinding moves are natural,
and it will take something meaningful to lead the market to expect more rate
cuts than currently priced in and weaken the greenback further.
On the JPY side, the focus
has now switched to the BoJ. The market is now pricing much higher chances of a
rate hike by year-end following the US-Japan trad deal. In fact, the central
bank mentioned several times that they wanted to see first how things evolved
with trade negotiations before adjusting interest rates.
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 drivers could be a signal from the BoJ to
deliver more rate hikes given lower uncertainty or 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 is rejecting once again the key resistance
zone around the 148.30 level. The sellers stepped in there to position for a
drop back into the 142.35 support. The buyers will need a clear breakout to extend
the rally into the 151.20 level next.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a minor support zone around the 147.00 handle. If the price
gets there, we can expect the buyers to step in with a defined risk below the
support to position for a rally back into the resistance targeting a breakout.
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 broke below the upward trendline
that was defining the bullish momentum on this timeframe. We now have a minor
downward trendline defining the current pullback. The sellers will likely
continue to lean on it to keep pushing into new lows, while the buyers will look
for a break higher to target the 151.20 resistance next. The red lines define
the average daily range for today.
Upcoming
Catalysts
Today we have the US ADP, the US Q2 GDP
and the FOMC rate decision. Tomorrow, we have the BoJ rate decision, the US PCE
price index, the US Jobless Claims and the US Employment Cost Index. Finally,
on Friday, 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.