Fundamental
Overview
The USD got a boost from
the strong US Consumer Confidence data which triggered an aggressive
rise in long term Treasury yields. The report however just showed that the
labour market remains resilient which is good news for growth and not
necessarily bad news for inflation. Moreover, the month-end flows might have
distorted the price action in the last couple of days which led to some risk-off
sentiment and boosted the Yen.
The USD should remain supported
against the JPY amid the Fed’s higher for longer stance and the positive risk
sentiment because both the scenarios are negative for the Yen. The trend will
likely change only when we start to get some recessionary US data that will
make the market to price in a more aggressive rate cut path and lead to some
risk-off sentiment.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY continues to creep higher amid resilient US economic data. From
a risk management perspective, the buyers will have a better risk to reward
setup around the trendline
although we will likely need some weak US data or a downside surprise in the US
CPI to trigger such a big correction. For now, the path of least resistance
remains to the upside.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that the price has been consolidating around the 157.00 handle. There’s a
good support for the buyers around the minor trendline where we can also find
the 38.2% Fibonacci retracement level for confluence. The sellers will want to see the
price breaking below the trendline to extend the correction into the major
trendline next.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see more clearly the rangebound price action between the 156.50 support
and the 157.20 resistance of the last couple of weeks. We got a breakout
recently as Treasury yields rallied but all the gains were erased yesterday without
a clear catalyst.
This might be due to the month-end
flows distorting the price action. The red lines represent the average daily
range for today. If we get a soft US PCE, we might get the pullback into the
trendline where the buyers will likely step in to buy the dip. On the other
hand, a break above the resistance should see the bullish momentum increasing.
Upcoming
Catalysts
Today we conclude the week with the US PCE report which is
unlikely to change much for the Fed as the central bank remains in a “wait and
see” mode. Nonetheless, a cold report could weigh on the USDJPY in the short
term while hot figures should give it a boost.
See the video below
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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