The USD weakened
across the board recently due to a more dovish than expected FOMC decision last
week where the Fed decided to signal a bigger QT taper beginning in June and
the Fed Chair Powell pushing 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 bought the dip offered by the miss in the US NFP report as
that didn’t change much for the bigger picture. The sellers don’t have much to
work with at the moment, so they might want to wait for the price to break
below the trendline and the strong support around the 152.00 handle before piling
in more aggressively and target the 146.00 handle.
USDJPY Technical Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour
chart, we can see that the pair has now basically reached the key resistance
zone around the 155.00 handle. The price is tentatively breaking above the trendline although
we will likely need an extension above the 155.00 handle to trigger a stronger
rally. That’s when we can expect the buyers to pile in with more conviction and
target the 160.00 handle. The sellers might start stepping in around these
levels to position for a break below the trendline with a better risk to reward
setup but there’s not much at the moment that can give them support.
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.