Fundamental Overview
The USD has been gaining against the JPY despite some softness against other major currencies. This is due to the Yen being under pressure from positive global growth impulse and the yield differential with the Fed. The Fed is expected to keep rates steady until at least September, which is contributing to the Yen’s weakness.
In this environment, it is unlikely that the Yen will see a sustained bid. The trend may only change if there is recessionary US data that leads the market to price in a more aggressive rate cut path.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, USDJPY has reached the key swing level at 156.80. A break above this level could lead to a rally towards the 158.00 handle, with the ultimate target being the intervention level at 160.00. At this level, we may see a strong rejection as buyers look to square their positions and sellers try to enter with a defined risk above the level.
USDJPY Technical Analysis – 1 hour Timeframe
Looking at the 1-hour chart, there is strong support around the 156.50 level, where the trendline and the 38.2% Fibonacci retracement level converge. If there is a pullback to the trendline, buyers may step in with a defined risk below it to position for a rally towards the 158.00 handle. Sellers, on the other hand, may want to see the price break lower towards the 156.00 handle, potentially triggered by weak US PMIs.
Upcoming Catalysts
Today, we are expecting the latest US PMIs and Jobless Claims figures. Tomorrow, the week will conclude with the Japanese CPI report.
Watch the video below for more insights.