Fundamental Overview
The USD has strengthened
since Friday as Treasury yields bounced following some positive Trump’s
comments on China. Overall, the US dollar performance has been mixed as markets
have been driven by quick changes in risk sentiment given the lack of US data.
On the domestic side, the
US government shutdown continues to delay many key US economic reports. Today
though, we will get the US CPI data since it’s crucial for social security
benefits adjustment required by November.
The dollar “repricing
trade” needs strong US data to keep going, especially on the labour market
side, so any hiccup on that front should keep weighing on the greenback.
Since Trump’s threat of
massive tariffs on China, the market pricing turned more dovish with 119 bps of
easing seen by the end of 2026 (the Fed projected just 75 bps). Therefore, if
we de-escalate further and the US data picks up, there should be plenty of room
for the greenback to appreciate.
On the JPY side, the
currency strengthened recently on the risk-off sentiment that got triggered by
Trump’s tariffs threat but eventually gave back most of the gains as things
de-escalated. Domestically, Takaichi became Prime Minister, and we saw some
more weakness in the yen as traders continue to expect the BoJ to delay rate
hikes.
Today’s Japanese Core CPI came
in line with expectations at 2.9% which is in the BoJ range of 2.5%-3.0% projection
for 2025. The market sees just a 40% probability of a rate hike by year-end.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY eventually rallied back into the 153.00 handle and it’s now
close to the top trendline. 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 support. The buyers, on the other hand, will want to see the price
breaking higher to extend the rally into the 154.80 level next.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have an upward trendline defining the bullish momentum. The buyers
will likely continue to lean on the trendline with a defined risk below it to
keep pushing into new highs, while the sellers will look for a break lower to
pile in for a drop into the 151.00 support.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much else we can add here as the sellers will look for shorts around the
153.26 level and below the upward trendline, while the buyers will look for
longs above the 153.26 level or around the upward trendline. The red lines
define the average daily range for today.
Upcoming
Catalysts
Today, we conclude the week with the US CPI report and the US flash PMIs.
Video
This article was written by Giuseppe Dellamotta at investinglive.com.
