Fundamental
Overview
Nothing has changed in
terms of the fundamentals this week as the market awaits the US NFP and the US
CPI data. The US Dollar continues to consolidate around the highs as the market
reached the peak in the repricing of interest rates expectations and it will
need stronger reasons to price out the remaining rate cuts for 2025.
This was signalled by the
lack of US Dollar strength after lots of strong US data with the market’s
pricing remaining largely unchanged around three rate cuts by the end of 2025.
We might see the greenback remaining on the backfoot at least until the US CPI
due next week.
On Monday, Fed’s Waller and Fed’s Williams sounded like a rate cut in December
is basically a done deal with the plan to slow the pace of rate cuts
considerably in 2025. We will likely need another hot CPI report to force them
to skip the December cut.
On the JPY side, the market
pared back the probabilities for a rate hike in December from 58% to 40% now,
although it continues to expect at least two rate hikes by the end of 2025. We
haven’t got anything in the meantime, so the latest repricing might be due
entirely to JPY strength.
We got the Japanese wage
data today but it came in line with estimates. At this point, the market is
seeing higher chances for a cut in January 2025.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can
see that USDJPY is consolidating above the 149.40 level as the buyers continue
to pile in to position for a rally into the 160.00 handle. From a risk
management perspective, the sellers will have a better risk to reward setup
around the key 151.90 level. The buyers, on the other hand, will want to see
the price breaking higher to increase the bullish bets into new highs.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see that we have a downward trendline defining the bearish momentum on
this timeframe. The sellers will likely lean on it with a defined risk above
the 151.90 level to position for a drop into new lows. The buyers, on the other
hand, will look for a break higher to increase the bullish bets into new highs.
USDJPY Technical
Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can
see that we’ve been having a very choppy price action recently as the market was
waiting for the key catalysts before picking a direction. Today we have the US
NFP report and good data will likely provide a spike into the trendline that
the sellers can fade to position for a drop into new lows.
We will likely need very
strong data to see a change in the market’s pricing and give the USD a bigger
boost. In case the data is worse than expected, the sellers should take easily
control and drive the pair much lower. The red lines define the average daily range for today.
Upcoming
Catalysts
Today, as
mentioned previously, we conclude the week with the US NFP report.