Basic Overview
Yesterday, around 1:00 p.m. EST, Timeraus of the Wall Street Journal published an article that seemed to suggest that a 50 basis point rate cut was still under discussion. The market responded by raising the odds of a 50 basis point rate cut to around 43% from 13% before the news.
Nick Timeraos is considered a Fed insider, so the market is paying attention to everything he writes regarding potential Fed decisions.
The odds of the Fed cutting rates by 50 basis points at its next meeting are around 43%, and a total of 115 basis points of easing by the end of the year. For the Bank of Japan, the market sees a 100% chance of no change at its next meeting and a total of 8 basis points of easing by the end of the year.
USD/JPY Technical Analysis – Daily Time Frame
USDJPY Daily
On the daily chart, we can see that the USD/JPY pair is now approaching the key 140.20 level. Here we can expect buyers to step in with risks set below this level for a move towards the 150.00 level. On the other hand, sellers will want to see the price drop to the 137.00 level to increase bearish bets towards the 137.00 level after that.
USD/JPY Technical Analysis – 4-hour time frame
USD/JPY 4 hours
On the 4-hour chart, we can see that we have a bearish trend line that defines the current bearish momentum. If we get a pullback from the 140.20 level, sellers will likely rely on the trend line with risk defined above it to place a position to break the support at 140.20 with a better risk-reward setup. On the other hand, buyers will want to see the price move higher to increase bullish bets on the next major trend line around the 145.00 level.
USD/JPY Technical Analysis – 1-Hour Time Frame
USDJPY 1 hour
On the 1-hour chart, we can clearly see that the Wall Street Journal article is acting as a catalyst for a drop to the lows. There is not much we can conclude from this time frame as buyers will look to buy on dips around the 140.20 level and sellers will target a break below it. The red lines mark the average daily range for the day.
Upcoming incentives
Today we wrap up the week with the University of Michigan Consumer Confidence report which is expected to come in at 68.0 vs. 67.9 last month.