Fundamental
Overview
The US Dollar is now lower across
the board as the market erased most of the greenback’s gains following Trump’s
victory. This has been a puzzling reaction as Trump’s policies are likely to
spur growth and potentially end the Fed’s easing cycle earlier than expected.
We can argue that the
market was already positioned for a Trump’s victory as we saw the greenback
rallying for a couple of weeks leading into the US election. So, this might
just be a “sell the fact” reaction and the market might now need more to keep
bidding the USD.
Another possible
explanation is that the market is more focused on global growth now and that’s
generally bearish for the greenback. We saw something similar in 2016 when the
USD rallied strongly once Trump got elected but after a couple of months, it went
into a 2-year long downtrend.
The Fed for now remains
neutral and on track to keep cutting rates. Yesterday, they cut by 25 bps as
expected and given the overall neutral message, the market expects another 25
bps cut in December. Strong data from now until the December meeting though
could change their plans for 2025.
We have the US CPI report
next week and that’s going to be a test. If the US Dollar sells off on hot
data, then the market might be indeed focusing on global growth rather than the
potential for an earlier pause in the Fed’s easing cycle.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can
see that USDJPY failed to extend the rally above the recent high and it’s now
on track to pull back to the key support zone around the 152.00 handle. The buyers will
likely step back in around the support to position for a rally into new highs,
while the sellers will look for a break lower to increase the bearish bets into
the 148.00 handle next.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see that we have a minor upward trendline
defining the current bullish momentum. We can also see that we have the
confluence of the trendline and the support around the 152.00 level which
should technically strengthen that support zone. That’s where the buyers will
look for a bounce, while the sellers will look for a break lower.
USDJPY Technical
Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can
see that we have a minor downward trendline defining the current pullback into
the 152.00 support zone. The sellers will likely keep on leaning on it to
position for the break below the support, while the buyers will want to see the
price breaking higher to pile in for a rally into new highs. The red lines
define the average daily range for today.
Upcoming
Catalysts
Today we conclude the week with the University of Michigan Consumer Sentiment
report.