USDJPY is probing above a key resistance: legitimate breakout or one other fakeout?

Fundamental
Overview

The USD weakened across the
board in the first part of the week but managed to erase all the losses
yesterday with an incredible rally. We haven’t got any catalyst for the move
but there was no reason for the weakness at the start of the week either.

Fed speakers this week
haven’t offered anything new and just reiterated that the labour market
weakness “forced” them to move towards neutral. This means that if we were to
get stronger labour market data, the Fed could start to turn more hawkish again
and we might not get another cut in October of December.

Looking ahead, we have the
US Jobless Claims report today and good data will likely give the greenback
another boost. Weak data, on the other hand, could lead to a pullback. The biggest
event will be the NFP report next Friday.

On the JPY side, the BoJ
kept interest rates unchanged as expected last week but the market got
surprised by two members voting for a rate hike. The yen initially rallied but
once Governor Ueda started speaking, the gains began to fade and eventually got
erased completely as Ueda downplayed the dissenting votes.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY is probing above the key resistance zone around the 148.50 level. This
is where we can expect the buyers to increase the bullish bets into the 151.00
handle, while the sellers will look for the price to fall back below the
resistance to pile in for a drop back into the major trendline.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor upward trendline defining the bullish momentum on this
timeframe. If we get a pullback, the buyers will likely lean on the trendline
with a defined risk below it to position for a rally into the 151.00 handle.
The sellers, on the other hand, will look for a break lower to increase the
bearish bets into the major trendline next.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else we can add here but if the dollar’s momentum remains strong, we
should see the buyers piling in on the break of the recent high at 148.92. The
red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the latest US Jobless Claims figures. Tomorrow,
we conclude the week with the Tokyo CPI and the US PCE report. Keep also an eye
on Fed speakers.

Watch the video below