The USD weakened
across the board last week due to a more dovish than expected FOMC decision
where the Fed decided to signal a bigger QT taper beginning in June and the Fed
Chair Powell pushed back repeatedly against rate hike expectations. Moreover,
the data on Friday showed that the Fed might indeed just keep rates
higher for longer as job and wage growth soften.
The JPY, on the other
hand, doesn’t have much fundamental support as the BoJ might not be able to
lift interest rates again given the easing inflation rates, although there
might be some short-term support from hawkish messages around the reduction of
the QE programme. All else being equal, the USDJPY pair should remain in an
uptrend both from the Fed’s higher for longer stance and global growth
expectations.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart,
we can see that USDJPY bounced on the strong support
zone around the 152.00 handle where we had the confluence
of the trendline
and the 61.8% Fibonacci
retracement level. The buyers stepped in and bought the dip offered by the
miss in the US NFP report as that didn’t change much for the bigger picture.
The sellers will need the price to break below the trendline to change the bias
and start looking for new lows with the 146.00 handle as the first target.
USDJPY
Technical Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour
chart, we can see that we now have a strong resistance around the 155.00 handle
where we can also find the downward trendline defining the current short-term bearish
trend. That’s where we can expect the sellers to step in with a defined risk
above the trendline and position for a break below the 152.00 support with a
better risk to reward setup. The buyers, on the other hand, will want to see
the price breaking higher to increase the bullish bets into the 160.00 handle.
Upcoming
Catalysts
This week is pretty bare on the data front with just the Japanese
wage data and the US Jobless Claims on Thursday and the University of Michigan
Consumer Sentiment survey on Friday being the only notable releases. It’s
unlikely that they will change the market’s expectations that much, so the
price action might remain tentative heading into the US CPI next week, although
the bias should remain bullish.