Fundamental Overview

The USD weakened across the board last Friday following the soft US NFP report. The data showed some more labour market cooling with an increase in the unemployment rate and a decrease in wage growth. We basically have an economy that is slowing but still growing. The market seems to be taking it as good news as it still expects a soft landing.

Even if the US Dollar weakens against the other major currencies, the JPY in this environment should keep losing ground and the Japanese officials can’t do much to reverse the trend unless the fundamentals change. We will likely need weak US growth data to see some sustained Yen strength, although it might be short lived if it’s not enough to make the market to price in more aggressive rate cuts for the Fed.

USDJPY Technical Analysis – Daily Timeframe

USDJPY Technical Analysis

On the daily chart, we can see that USDJPY last week pulled back towards the key 160.00 handle after some soft US data, but eventually erased all the losses this week. The buyers will want to see the price breaking above the cycle high to increase the bullish bets into the 165.00 level.

The sellers, on the other hand, will need the price to fall below the 160.00 handle to turn the bias more bearish and position for a drop into the major trendline around the 158.00 level.

USDJPY Technical Analysis – 4 hour Timeframe

USDJPY Technical Analysis
USDJPY 4 hour

On the 4 hour chart, we can see that the price broke above the downward minor trendline this week that was defining the bearish momentum into the 160.00 handle. The buyers piled in on the breakout and extended the rally into the 161.80 level. There’s not much to do here for the sellers other than waiting for a change in momentum to start positioning for new lows.

USDJPY Technical Analysis – 1 hour Timeframe

USDJPY Technical Analysis
USDJPY 1 hour

On the 1 hour chart, we can see that we now have a minor upward trendline defining the current bullish momentum. The buyers will keep on leaning on it to target new higher highs, while the sellers will want to see a break below it to position for a drop into the 160.00 handle next. The white lines define the average daily range for today.

Upcoming Catalysts

Today is the most important day of the week as we get the US CPI and the US Jobless Claims figures. Tomorrow, we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.

See the video below