The USD weakened across the
board yesterday following a notable miss in the US
initial claims data as that added some more pressure on the USD with the
market weighing the possibility that the labour market could weaken fast enough
in the next months to justify more rate cuts than expected. Overall though, the
price action has been rangebound this week as the lack of key catalysts and the
waiting for the US CPI report kept the market at bay.
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. The only thing that can change the trend at the moment is much
weaker US data.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily
chart, we can see that USDJPY continues to run to the upside as the lack of
fundamental support and the failure of the Japanese interventions is giving the
buyers enough conviction to keep bidding the pair towards the key 160.00 level.
That’s where we will likely see the sellers stepping in with more conviction to
position for a drop back into the trendline.
For the time being, the buyers remain in control.
USDJPY
Technical Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart,
we can see that the next resistance to watch will be the 156.28 level as a
break to the upside should see the buyers increasing the bullish momentum into the
next resistance around the 158.00 handle. The target remains the 160.00 handle
and unless we get a downside surprise in the US inflation figures next week, we
will likely see the pair continuing to drift higher.
Upcoming
Catalysts
Today we conclude the week with the University of Michigan consumer
sentiment survey. It’s unlikely that we will see major changes to the market’s
expectations though, so the next big event to watch will be the US CPI next Wednesday.