The miss in the US NFP and
CPI reports triggered a broad USD selloff as the market expected the Fed to be
done with rate hikes after the July FOMC meeting. In fact, the market has even
started to bring forward rate cuts, although it looks premature due to a strong
labour market and overall good economic data. In fact, the better-than-expected
US retail sales and the US initial claims gave the USD some support as the
market repriced a bit its expectations.
On the other hand, the BoJ
maintains its dovish stance while core inflation remains at a four decades high.
There are very few signs of a possible exit from the current policy but the BoJ
board members keep on dismissing any change at the upcoming meeting, and after
today’s CPI data and a Reuters report citing sources that the BoJ will
leave its policy unchanged, there shouldn’t be any doubt that we will indeed
see no change.
USDJPY Technical Analysis –
Daily Timeframe
USDJPY Daily
On the daily chart, we can see
that after tapping into the 145.00 handle, USDJPY had a big run to the downside
following the miss in the US NFP and CPI reports. The selloff stalled at the
key 137.95 support where we
had also the confluence with the
61.8% Fibonacci retracement level.
Since then, USDJPY started to rally again as the US data kept on surprising to
the upside and the hopes for a BoJ policy change waned.
USDJPY Technical Analysis –
4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can see that the moving averages have
crossed to the upside and the price has been printing higher highs and higher
lows. We are clearly back in an uptrend as the price has also broken above a
resistance zone near the 139.00 handle and rose back above the major trendline. All
else being equal, we should keep on seeing the buyers stepping in at every
pullback leaning on the moving averages and the swing levels.
USDJPY Technical Analysis –
1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can see that we
also had a head and shoulders
pattern formed right at the key support zone. The price then broke above the
neckline around the 139.00 handle and kept on rising to new highs. We can see
that we have clear support and resistance zones now. If we get another
pullback, the buyers should lean on the support zone around the 140.50 handle
to target another higher high. The sellers, on the other hand, will want to see
the price breaking below the support to target the next support zone around the
140.00 handle where we are likely to find again the buyers targeting another
rally.
See also the video below: