Fundamental Overview
The USD strengthened across
the board yesterday following a hawkish comment from Fed Chair Powell. In fact,
the Fed decision was in line with expectations but the only thing that mattered
is one line from Powell saying “a December cut is not a foregone conclusion –
in fact, far from it”.
He repeated that a few
times suggesting that there’s really a strong debate within the FOMC. Remember
that the neutral and hawkish members outnumber the dovish members easily. Of
course, everything is conditional to the data, but Powell also added that in
case they don’t get the data, they might as well skip the December cut.
We saw bit of a hawkish
repricing in interest rate expectations with the December probability falling
to 70% vs 90% before Powell’s speech. The total easing by the end of 2026 shows
87 bps which is still too dovish compared to 50 bps expected by the Fed.
On the JPY side, the currency weakened across the board as the BoJ
left interest rates unchanged as expected with again two dissenters voting for
a hike. There were no surprises. BoJ governor Ueda offered limited forward
guidance as he mostly repeated the same stuff highlighting trade uncertainty
and focus on spring wage negotiations. The market pricing turned a little bit
more dovish as the probability for a December hike fell to just 26% with the next
hike expected in March 2026 at the earliest.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY is breaking above the resistance around the 153.25 level where
we have the confluence of the previous high and the top trendline. The buyers likely increased the bullish bets to target a move into the 154.80 level
next. The sellers, on the other hand, will want to see the price falling back
below the resistance to step back in and position for a pullback into the
151.00 support.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see more clearly the current breakout. There’s not much else we can add here as
the buyers piled in on the breakout to target the 154.80 level, while the sellers
will look for a fall back below the resistance to position for a pullback.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a couple of upward trendlines defining the bullish momentum.
If the price gets there, we can expect the buyers to lean on the trendlines
with a defined risk below them to position for a rally into new highs. The
sellers, on the other hand, will look for downside breaks to increase the
bearish bets into the 151.00 support. The
red lines define the average daily range for today.
Upcoming
Catalysts
Tomorrow we conclude the week with the Tokyo CPI.
This article was written by Giuseppe Dellamotta at investinglive.com.