Fundamental
Overview
The USD had a mixed
performance this week following the US inflation data where the Core CPI and Core
PPI missed expectations. The greenback has been stronger against the commodity
currencies but not as much against the EUR or GBP. After the initial boost from
the CPI release, we can say that it just went sideways.
This might have to do with
positioning since the “short US dollar” trade has recently become the most
crowded trade and in such instances, it doesn’t take much to see strong
unwinding. After all the data, the market pricing for the Fed went pretty much
back to where we were at the beginning of the week.
On the JPY side, we haven’t
seen much change in terms of fundamentals as the focus remains on the US-Japan
trade negotiations. The BoJ is placing a great deal on trade developments and a
positive outcome will likely give the JPY a strong boost as traders would bring
forward expectations for a rate hike. The window to watch is between July 20
and August 1. On July 20, we have the Japanese upper house election and August
1 is Trump’s deadline for a deal.
The JPY might start to
appreciate already from Monday morning onwards if the ruling bloc retains the
majority in the upper house. The polls are suggesting that the ruling bloc is
expected to lose the majority, which might have been the reason keeping the yen
weaker going into the election. If the polls turn out to be wrong, we could see
traders positioning long on the yen on expectations of a US-Japan deal and an earlier
than currently expected rate hike.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY continues to consolidate right around the key 148.30 resistance. The buyers keep on piling in
around these levels to position for a rally into the 151.20 level, while the
sellers will need the price to fall below the 148.30 level to increase the
bearish bets into the 142.35 support 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. From
a risk management perspective, the buyers will have a better risk to reward
setup around the trendline to position for a rally into the 151.20 level. The
sellers, on the other hand, will look for a break below the trendline to
increase the bearish bets into the 142.35 support.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart,
there’s not much else we can add here as the buyers will look for dip-buying
opportunities around the trendline, while the sellers will look for a downside
breakout to push into new lows. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we conclude the week with the
University of Michigan Consumer Sentiment survey. Over the weekend, we have the Japanese upper house election.
As a reminder, on Monday forexlive.com evolves into investingLive.com. The right place for traders and investors who need to stay on top of financial market news.
This article was written by Giuseppe Dellamotta at www.forexlive.com.