USDJPY Technical Analysis – The greenback is back | Forexlive

Fundamental
Overview

The USD got a boost across
the board yesterday as the US-China tariff relief was much better than
expected. The market is now looking at the more hawkish scenario where we get
an average 10% global tariff rate and economic activity picks up on an easing
in growth fears and general uncertainty.

This is leading to a
hawkish repricing in interest rates expectations with the market now seeing 56
bps of easing for the Fed by year-end compared to like 120 bps at the peak of
the fears in April. The short dollar trade was also pretty overcrowded so the
unwinding in positioning is giving the greenback even more strength.

On the JPY side, the
currency has been driven mainly by global events rather than domestic
fundamentals. Alongside the Swiss Franc, it’s been the favoured safe haven in
the currencies space amid the swings in risk sentiment. The recent positive
mood in the markets weighed on the Japanese Yen which lost ground against all
the major currencies despite the market increasing the expectations for another
rate hike this year.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY broke above the major trendline yesterday following the much
better than expected US-China tariff relief. The buyers piled in on the
breakout and will now target the 151.00 handle. The sellers, on the other hand,
will want to see the price falling back below the trendline to position for a
drop into the 140.00 handle next.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have now an upward trendline defining the bullish momentum on this
timeframe. From a risk management perspective, the buyers will have a better
risk to reward setup around the trendline, while the sellers will look for a
break lower to increase the bearish bets into new lows.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else we can add here as the buyers will look for a bounce around the trendline,
while the sellers will look for a break lower. If the bullish momentum stays
strong, we can expect the buyers to increase the bullish bets on the break of
the recent high at 148.60. The red lines define the average daily range for today.

Upcoming
Catalysts

Today, we have the US CPI report. On Thursday, we get the
latest US Jobless Claims figures, the US PPI and the US Retail Sales data. On
Friday, we conclude the week with the Japanese Q1 GDP report and the University
of Michigan Consumer Sentiment survey.

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