Basic overview
The US dollar continues to get support from good economic data as we recently saw from the US PMIs last Friday and the US Consumer Confidence report yesterday. Such data keeps interest rate expectations stable around two cuts by the end of the year and supports risk sentiment amid a growth rebound.
The Japanese yen should continue to lose ground against the majors in this environment. We will likely need weak US growth data to see some continued strength in the yen, although it may be short-lived if it is not enough to get the market pricing in more aggressive rate cuts from the Fed.
Technical Analysis of USD/JPY – Daily Time Frame
USD/JPY daily
On the daily chart, we can see that USDJPY, after a slight decline on Monday, has risen again to the intervention level at the 160.00 handle. Remember, intervention is not guaranteed because the Japanese are facing strong fundamentals and the market is much larger than them.
However, we may see reactions like we did on Monday where buyers can settle their positions and sellers can accumulate with specific risks above this level. For now, the path of least resistance remains to the upside.
Technical Analysis of USD/JPY – 4 Hours Time Frame
USD/JPY 4 hours
On the 4-hour chart, we can see that if we get a pullback from the intervention level, buyers are likely to pull back around the 158.00 support level where we can also find the 38.2% Fibonacci retracement level to meet.
On the other hand, sellers will want to see the price break the 158.00 support level to increase bearish bets in the key trend line around the 156.00 level.
Technical Analysis of USD/JPY – 1 hour time frame
usd vs yen 1 hour
On the 1-hour chart, we can see that we have another simple upward trend line outlining the current bullish momentum. Buyers will likely continue to rely on the trend line with specific risks below it to put them in a position to break above the 160.00 resistance level with a better risk to reward setup.
On the other hand, sellers will want to see the price break down to increase bearish bets to the 158.00 support level. The dotted red lines mark the average daily range for the day.
Upcoming stimuli
Tomorrow we get the latest US unemployment claims figures, while we close out the week on Friday with Tokyo CPI and US PCE.