Basic Overview
The US dollar fell broadly last Friday after the release of the weak US non-farm payrolls report. The data showed further slowdown in the labor market with the unemployment rate rising and wage growth declining. Basically we have an economy that is slowing but still growing. The market seems to be taking this as good news as it still expects a soft landing.
Even if the US dollar weakens against other major currencies, the Japanese yen is expected to continue to lose ground in this environment, and Japanese officials will not be able to do much to reverse this trend unless fundamentals change. We will likely need weak US growth data to see some sustained strength in the yen, though this strength may be short-lived if it is not enough to make the market expect more aggressive rate cuts from the Fed.
USD/JPY Technical Analysis – Daily Time Frame
USDJPY Daily
On the daily chart, we can see that the USD/JPY pair fell last week towards the key 160.00 level after some weak US data, but eventually erased all losses this week. Buyers will want to see the price break the cycle high to increase bullish bets towards the 165.00 level.
On the other hand, sellers will need the price to drop below the 160.00 level to turn the bias further bearish and position the downside to the major trend line around the 158.00 level.
USD/JPY Technical Analysis – 4-hour time frame
USD/JPY 4 hours
On the 4-hour chart, we can see that the price broke through a minor downtrend line this week that was defining the bearish momentum to the 160.00 level. Buyers piled in on the breakout and extended the rally to the 161.80 level. There is not much for sellers to do here other than wait for a change in momentum to start positioning for new lows.
USD/JPY Technical Analysis – 1-Hour Time Frame
USDJPY 1 hour
On the 1-hour chart, we can see that we now have a small bullish trend line that defines the current bullish momentum. Buyers will continue to rely on it to target new higher highs, while sellers will want to see a break below it to set a position for the next drop to the 160.00 level. The white lines mark the average daily range for today.
Upcoming incentives
Today is the most important day of the week as we get the US CPI and US Jobless Claims numbers. Tomorrow, we wrap up the week with the US PPI and the University of Michigan Consumer Sentiment Survey.