On the
daily chart below for USDJPY, we can see that the price found support at the trendline and the 133.77 level. The moving
averages remain crossed to the upside which keeps the uptrend intact. We can
also notice that the market is forming an ascending
triangle, which is generally followed by big moves once the price breaks out on
either side.
The
culprit for this USD/JPY rally is the rise in the Treasury yields due to the
recent better than expected data and rising long term inflation expectations in
the University
of Michigan report. Fed Chair Powell once mentioned that they are
looking at those expectations for their policy decision, so the bond market
reacted accordingly.
On the 4
hour chart below, we can see that after breaking above the 135.09 resistance, the price extended the rally
towards the 136 handle. Yesterday, US
Retail Sales beat expectations and gave the USD another boost
for a run towards the 137 level. The moving averages will act as resistance now
and we should see new higher highs unless the Jobless Claims tomorrow show a big miss to the
expectations or Fed Chair Powell on Friday sounds dovish.
On the 1
hour chart below, we can see that we have a trendline supporting this rally and
that the price bounced from a resistance-turned-support during the APAC
session. We can also see that we have a divergence with the MACD which is generally a signal for
weakening momentum and it’s often followed by pullbacks or reversals.
If we do
get a pullback, the buyers should lean to the support zone at 136.25 where they
will also find the trendline and the red long period moving average for further
confluence. The sellers, on the other hand,
will want to see the price breaking below that support zone to pile in and push
the price towards the 135 handle.