Fundamental Overview
The USD has strengthened since
Friday as Treasury yields bounced following some positive Trump’s comments on
China. Overall, the US dollar performance has been mixed as markets have been
driven by quick changes in risk sentiment given the lack of US data.
On the domestic side, the
US government shutdown continues to delay many key US economic reports. This Friday
though, we will get the US CPI data since it’s crucial for social security
benefits adjustment required by November.
The dollar “repricing
trade” needs strong US data to keep going, especially on the labour market
side, so any hiccup on that front should keep weighing on the greenback. Since
Trump’s threat of massive tariffs on China, the market pricing turned more
dovish with 126 bps of easing seen by the end of 2026 (the Fed projected just
75 bps).
On the JPY side, the
currency strengthened recently on the risk-off sentiment that got triggered by
Trump’s tariffs threat but eventually gave back most of the gains as things
de-escalated. Domestically, Takaichi became Prime Minister, and we saw some
more weakness in the yen as traders continue to expect the BoJ to delay rate
hikes. In fact, the probabilities for a rate hike by year-end slipped to just
40%.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY managed to rally back above the major support zone around the
151.00 handle. If we get a pullback, we can expect the buyers to step in again
around the support with a defined risk below it to position for a rally into
the 153.00 handle. The sellers, on the other hand, will want to see the price
breaking lower to pile in for a drop into the 148.50 support next.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have an upward trendline adding confluence to the support zone.
That’s where we can expect the buyers to step in with a defined risk below those
key level to keep pushing into new highs. The sellers, on the other hand, will
look for a break lower to start targeting the 148.50 support next.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much else we can add here as buyers will look for a bounce around the
support, while the sellers will look for a downside breakout. The red lines
define the average daily range for today.
Upcoming
Catalysts
On Friday, we will get
the US CPI report and the US flash PMIs.
Watch the video below
This article was written by Giuseppe Dellamotta at investinglive.com.