Fundamental
Overview
The USD rallied across the
board last week after a slate of strong US data. The focus was mainly on Jobless Claims which beat expectations by a big
margin with Initial Claims falling to the lowest level since July and
Continuing Claims improving further. This triggered a hawkish repricing in
interest rates expectations since the Fed started cutting rates solely due to
weaker labour market data.
This means that if we
continue to get stronger labour market data, the Fed could start turning more
hawkish again and we might not get another cut in October, or more probably in
December. Therefore, there’s still plenty of room for the US dollar to appreciate
in case of strong data as the market’s pricing remains too dovish. The Fed
projected 75 bps of easing by the end of 2026, while the market is still
pricing 104 bps.
The greenback erased all
the gains triggered by last week’s data in the meantime as we are likely
experiencing a pullback after a very strong rally. Other possible reasons
include the government shutdown fears and quarter-end flows.
On the JPY side, we haven’t
got any meaningful change in fundamentals in the meantime. The BoJ kept
interest rates unchanged as expected at the last meeting, 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
USDJPY daily
On the daily chart, we can
see that USDJPY broke above the key resistance zone around the 148.50 level and
extended the rally into the 150.00 handle before pulling back into the
resistance now turned support. This is where we can expect the buyers to step
in with a defined risk below the support to position for a rally into the
151.00 handle next. The sellers, on the other hand, will want to see the price
breaking lower to pile in for a drop into the major trendline around the 146.50 level.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see more clearly the pullback into the previous resistance now turned support. There’s not much else we can add
here as the buyers will look for a bounce and a rally into new highs, while the
sellers will look for a break lower to target the major trendline.
USDJPY Technical
Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can
see that we have a minor downward trendline defining the current pullback. The
sellers will likely continue to lean on the trendline to keep pushing into new
lows, while the buyers will look for a break higher to increase the bullish
bets into the 151.00 handle. The red lines define the average daily range for today.
Upcoming
Catalysts
Tomorrow we get the BoJ Summary of Opinions,
the US Job Openings data and the US Consumer Confidence report. On Wednesday,
we have the Japanese Tankan report, the US ADP and the US ISM Manufacturing
PMI. On Thursday, we get the latest US Jobless Claims figures. On Friday, we
conclude the week with the US NFP report and the US ISM Services PMI. Keep also
an eye on Fed speakers.
