Basic Overview
The US dollar fell last week after another weak US CPI report and positive jobless claims numbers. The market has not only fully priced in a September rate cut, but has also started to price in some chances of a back-to-back rate cut in November. Overall, we have seen good data releases with the economy slowing but still growing. This should support the soft landing narrative and be positive for risk sentiment.
But even if the US dollar weakens against other major currencies, the Japanese yen is likely to continue losing ground in this environment, and Japanese officials will not be able to do much to reverse this trend unless fundamentals change. Last week, the Japanese intervened immediately after the release of the weak US CPI report, as the strategy appears to have shifted from buying the yen in times of low liquidity to supporting it in light of weak US data.
Overall, the data shouldn’t change much as we would likely need weak US growth data to see some sustained strength in the yen, although this could be short-lived if it isn’t enough to get the market to anticipate more aggressive rate cuts from the Fed due to recession fears. As long as we have stable global growth and positive risk sentiment, the yen should struggle to maintain any strength.
USD/JPY Technical Analysis – Daily Time Frame
USDJPY Daily
On the daily chart, we can see that the USD/JPY pair is consolidating at the major trend line around the 158.00 level as buyers continue to enter with risks set below the trend line to pave the way for a rally to a new session high. Sellers will need the price to break below the trend line to turn the bias further bearish and increase bets on the 154.00 level after that.
USD/JPY Technical Analysis – 4-hour time frame
USD/JPY 4 hours
On the 4-hour chart, we can more clearly see the consolidation on the trend line and the support area around the 158.00 level. We can expect the buyers to continue defending the support and position for the upside continuation. A break above the 160.00 level would give the buyers more confidence and increase the bullish momentum to a new cycle high.
USD/JPY Technical Analysis – 1-Hour Time Frame
USDJPY 1 hour
On the 1-hour chart, we can see that we have an important swing level at 159.50. If the price rises above it, we can expect the bullish momentum to increase. The white lines mark the average daily range for the day.
Upcoming incentives
Today we get the US retail sales report. Tomorrow we have Waller from the Fed. On Thursday we get the latest US jobless claims numbers and on Friday we wrap up the week with Japanese CPI data.
