USDJPY Technical Analysis | Forexlive

The big miss in the US CPI report last week triggered a broad USD selloff
as the market expected the Fed to be done with rate hikes after the July FOMC
meeting. In fact, the market has even started to bring forward rate cuts,
although it looks premature due to a strong labour market and rising consumer sentiment.

On the other hand, the BoJ
maintains its dovish stance while core inflation in Japan keeps on rising. There
are small signs of a possible exit from the current policy though despite the
BoJ board members keep on dismissing any change at the upcoming meeting.
Nevertheless, the market still sees the risk of a surprising change to the YCC
policy.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that the key 137.95 support has
stalled the selloff in USDJPY. We have also the 61.8% Fibonacci retracement level
there for further confluence. A break
below this level would trigger more selling pressure and there wouldn’t be any
support until the 134.00 handle.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price
action has formed an inverted head and shoulders pattern
at the key support level. The buyers should lean on this level with a defined
risk below the head and target a pullback into the 142.00 level. The sellers,
on the other hand, will want to see the price breaking lower to pile in and
extend the selloff.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor resistance zone around the 139.20 level and the broken trendline. A
break above that resistance should see even more buying pressure coming in and
confirm the pullback into the 142.00 level. The sellers, on the other hand,
should keep on leaning on that resistance for a better risk to reward setup in
case the price breaks eventually through the 137.95 support.

Upcoming Events

Today the market will
be focused on the US Retail Sales report. The market will want to see if
there’s weakness in consumer spending that can reduce inflationary pressures
and lead to earlier rate cuts. In fact, if the data misses expectations we are
likely to see more downside for the USDJPY pair, while a beat should provide a
bigger pullback to the upside. The next big event to watch out for will be the
US Jobless Claims on Thursday.