USDJPY Technical Analysis | Forexlive

USD

The Fed left interest rates unchanged as expected
at the last meeting with basically no change to the statement.
Fed Chair Powell stressed once again that they are
proceeding carefully as the full effects of policy tightening have yet to be
felt.
The US Core PCE last week came in line
with forecasts with the disinflationary progress continuing steady.
The labour market continues to show weakness as Continuing
Claims are now rising at a fast pace with the last NFP report missing across
the board. This week’s Job Openings and ADP came below forecasts. although the Jobless
Claims were better than expected.
The ISM Manufacturing PMI last week missed
expectations falling further into contraction, while the ISM Services PMI beat
forecasts holding on in expansion.
The hawkish Fed members recently shifted
their stance to a more neutral position.
The market expects the Fed to start cutting rates
as soon as Q1 2024.

JPY

The BoJ kept its monetary policy basically
unchanged at the last meeting but formally widened the YCC to 1% on the 10-year
JGBs stating that it will be a reference cap.
Governor Ueda yesterday hinted to
rate hikes coming in 2024 and caused an insane bid in the Yen.
The recent Japanese CPIshowed that inflationary pressures are easing
although they remain well above the BoJ’s 2% target.
The latest Unemployment Rate
remained unchanged near cycle lows.
The Japanese Manufacturing PMI fell
further into contraction, but the Services PMI ticked higher remaining in
expansion.
The Japanese wage data today beat
expectations once again and as a reminder the BoJ is focusing on wage growth to
decide whether to tweak its monetary policy.
The market expects the BoJ to hike
rates in Q2 2024.

USDJPY Technical Analysis –
Daily Timeframe

USDJPY Daily

On the daily chart, we can see
that USDJPY broke below the rising channel
and sold off following the comments from BoJ Governor Ueda where he hinted to
rate hikes coming in 2024. The pair eventually extended the drop once the key
145.00 handle got broken as the severity of the selloff might have triggered
some momentum based algo reaction. The bias for the pair remains bearish as not
only the fundamentals keep pointing to more downside going forward but the
technicals are now aligned with the macro picture.

USDJPY
Technical Analysis – 4 hour Timeframe

USDJPY 4 hour

On the 4 hour chart, we can see that as it usually
happens after such mini flash crashes, the pair erased some of the drop and
it’s now pulling back into the key 145.00 handle where we can also find the
61.8% Fibonacci retracement level for confluence. This is where we can expect
the sellers to step in with a defined risk above the level to position for
another drop into new lows. If the price breaks higher though, the next
resistance where the sellers are likely to pile in will be the trendline around
the 146.50 level.

USDJPY Technical Analysis –
1 hour Timeframe

USDJPY 1 hour

On the 1 hour chart, we can see more
closely the bearish setup with the two key resistance zones marked on the
chart. For the buyers things are more complicated as there’s no clear support
level in sight and catching such falling knifes is always extremely hard.