Fundamental Overview
Despite some softness against the other major currencies, the USD continued to gain against the JPY as the Yen remains under pressure from risk-on sentiment due to positive global growth impulse and the stark yield differential with the Fed, which is expected to keep rates steady at least until September.
In such an environment, the Yen is unlikely to catch a sustained bid. The trend will likely change only when we start to get some recessionary US data that will make the market to price in a more aggressive rate cut path.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY reached the key swing level at 156.80. A break above that level would open the door for a rally into the 158.00 handle. The ultimate target remains the intervention level at 160.00.
That’s where we will likely see a strong rejection as the buyers will want to square their positions and the sellers will try to step in with a defined risk above the level to position for a drop back into the trendline.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a good support around the 156.50 level where we can find the confluence of the trendline and the 38.2% Fibonacci retracement level. If we get a pullback into the trendline, we can expect the buyers to step in with a defined risk below it to position for a rally into the 158.00 handle with a better risk to reward setup.
The sellers, on the other hand, will want to see the price breaking lower to extend the drop into the 156.00 handle where we can also find the lower limit of the average daily range. Such a scenario can be triggered by weak US PMIs, but the buyers will likely take it as a dip-buying opportunity.
Upcoming Catalysts
Today we will see the latest US PMIs and Jobless Claims figures. Tomorrow, we conclude the week with the Japanese CPI report.
