Fundamental
Overview
The USD got under some
pressure last Friday following the ugly University of Michigan survey where
consumer sentiment got revised lower and long-term inflation expectations
higher. The market responded by increasing more aggressively the expectations
for more easing from the Fed which triggered some short-term weakness in the greenback.
Today, we got some positive
comments from Trump regarding tariffs as he said that he was going to be nice
on tariffs. Unfortunately, there’s been lots of noise around tariffs in the
past weeks and it’s hard to trust anything until the official unveiling of the
plan tomorrow. But in the short-term, we could see some risk-on sentiment.
On the JPY side, the
currency has been driven mainly by global events rather than domestic
fundamentals as the market continues to price in around 31 bps of tightening by
year-end. The latest appreciation in the JPY was triggered by the risk-off flows last
Friday but as the sentiment started to improve, the yen gave almost everything
back.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can
see that USDJPY pulled back to retest the broke trendline and the key 148.60 level. The
buyers stepped in there with a defined risk below the level to position for a
rally into the 160.00 handle. The sellers, on the other hand, will want to see
the price breaking lower to regain control and start targeting the 140.00 handle
next.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see that we have a strong resistance
around the 151.00 handle where the price got rejected from several times in the
past months. The current price action looks like it formed the right should of
an inverted head
and shoulders pattern with the 151.00 handle as the neckline.
The buyers will want to see
the price breaking above the neckline to increase the bullish bets into new
highs, while the sellers will likely step back in again there to position for a
drop into new lows.
USDJPY Technical
Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can
see that we have a minor counter-trendline that could turn into a bullish flag.
On an intraday basis, the buyers will look for the price to break higher to
increase the bullish bets into the 151.00 handle, while the sellers will likely
lean on the trendline to target another drop into the 148.60 level. The red
lines define the average daily range for today.
Upcoming
Catalysts
Today we get the US Job Openings and the
US ISM Manufacturing PMI. Tomorrow, we have the US ADP and the unveiling of the
US reciprocal tariffs plan. On Thursday, we get the US ISM Services PMI and the
latest US Jobless Claims figures. On Friday, we conclude the week with the US
NFP report and Fed Chair Powell speech.
