The miss in the US NFP and CPI reports triggered a broad USD selloff as the market expected the Fed to be done with rate hikes after the July FOMC meeting. In fact, the market has even started to bring forward rate cuts, although it looks premature due to a strong labour market and overall good economic data. In fact, the better-than-expected US retail sales and the US initial claims gave the USD some support as the market repriced a bit its expectations.
On the other hand, the BoJ maintains its dovish stance while core inflation remains at a four decades high. There are very few signs of a possible exit from the current policy but the BoJ board members keep on dismissing any change at the upcoming meeting, and after today’s CPI data and a Reuters report citing sources that the BoJ will leave its policy unchanged, there shouldn’t be any doubt that we will indeed see no change.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that after tapping into the 145.00 handle, USDJPY had a big run to the downside following the miss in the US NFP and CPI reports. The selloff stalled at the key 137.95 support where we had also the confluence with the 61.8% Fibonacci retracement level. Since then, USDJPY started to rally again as the US data kept on surprising to the upside and the hopes for a BoJ policy change waned.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the moving averages have crossed to the upside and the price has been printing higher highs and higher lows. We are clearly back in an uptrend as the price has also broken above a resistance zone near the 139.00 handle and rose back above the major trendline. All else being equal, we should keep on seeing the buyers stepping in at every pullback leaning on the moving averages and the swing levels.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we also had a head and shoulders pattern formed right at the key support zone. The price then broke above the neckline around the 139.00 handle and kept on rising to new highs. We can see that we have clear support and resistance zones now. If we get another pullback, the buyers should lean on the support zone around the 140.50 handle to target another higher high. The sellers, on the other hand, will want to see the price breaking below the support to target the next support zone around the 140.00 handle where we are likely to find again the buyers targeting another rally.
See also the video below: