USDJPY Technical Analysis | Forexlive

After achieving 14
consecutive beats, the NFP report last Friday fell short of
expectations for the first time. However, the deviation was minimal, and the other
data was solid. The concern for the Federal Reserve may be the increase in
average hourly earnings. In fact, despite the miss in the NFP, the market still
anticipates a 25 bps rate hike by the FOMC at the upcoming meeting.

On the other hand, the BoJ
maintains its dovish stance keeping rates at -0.10 and the YCC at the usual
settings. Core inflation in Japan keeps on rising and there are only slightly
tentative signs of a possible exit from the current policy. The BoJ board
members keep on sounding dovish and dismissing any change at the upcoming
meeting.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that we finally got a big pullback in the USDJPY pair, and this might provide a
great buying opportunity if the policy divergence between the Fed and the BoJ
continues. At the moment the price is trading around a good support zone
where we have a previous swing high level and the 38.2% Fibonacci retracement level.
An even better level would be the 50% Fibonacci level where we will also have
the trendline for confluence. The
137.95 support and the 61.8% Fibonacci level will be the last line of defence
for the buyers.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the selloff
has been very strong in the past days. The US CPI report tomorrow can change
everything, as we could see an extension to the selloff or a complete reversal.
If the price breaks above the minor downward trendline, the buyers should start
piling in to target a new high, while the sellers should keep entering at every
break lower.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is struggling a bit now at the 140.50 support zone. In fact, we can
notice a divergence with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. If we get a pullback, the sellers should lean on the downward
trendline to position for more downside. The buyers, on the other hand, will
want to see the price breaking higher to pile in and target a new high.

Upcoming Events

The highlight of this week is the
tomorrow’s US CPI report. Should
the data exceed expectations, particularly in the core numbers, we can expect a
strong USD as the market would price in a more hawkish stance from the Federal
Reserve. Conversely, if the report falls short of expectations, it will likely
put downward pressure on the US Dollar, as the market would adjust its
probabilities for another rate hike and even consider the possibility of rate
cuts sooner than anticipated. We conclude the week with the US Jobless Claims
on Thursday and the University of Michigan Consumer Sentiment on Friday.