Fundamental Overview
The USD has been stronger
this week, but the tailwinds have been coming from outside the US. In fact, the
greenback’s strength has been coming mostly from USDJPY flows and the weakness
from other currencies like the EUR with the French political uncertainty and
the NZD with the RBNZ’s 50 bps cut.
Domestically, nothing has
changed for the US dollar as the US government shutdown continues to delay many
key US economic reports. The dollar “repricing trade” needs strong US data to
keep going, especially on the labour market side, so any hiccup on that front
is likely to keep weighing on the greenback.
In the absence of the
government data, an October rate cut is now seen as a done deal. The reality is
that an October cut was never really in question. It’s the December cut that
could be priced out in case the data strengthens. We still have three NFP and
two CPI reports before the December meeting.
On the JPY side, the
victory of Takaichi over the weekend resulted in a big negative gap at the open
for the yen as traders priced in more expansionary fiscal policy and a delay to
rate hikes from the BoJ. The ball is now in the central bank’s court as traders
will be focused on BoJ’s forward guidance.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY daily
On the daily chart, we can
see that USDJPY is trading at the top trendline around the 153.00 handle. This
is where we can expect the sellers to step in with a defined risk above the
trendline to position for a drop back into the 151.00 handle. The buyers, on
the other hand, will want to see the price breaking higher to keep pushing into
the 154.80 level next.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see more clearly the price action at the trendline with some visible
consolidation. The strong bullish momentum might stall here and lead to a deeper
pullback, but we will need to see a change in the trend on the lower timeframe to
confirm that.
USDJPY Technical Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can
see that we have a minor support zone around the 152.30 level. This is where the
buyers will likely continue to step in with a defined risk below the support to
keep pushing into new highs. The sellers, on the other hand, will look for a
break lower to increase the bearish bets into the 151.00 handle next. The red
lines define the average daily range for today.
Upcoming
Catalysts
Today we have Fed Chair Powell speaking, while tomorrow we
conclude the week with the University of Michigan Consumer Sentiment report.
