Basic Overview
The USD/JPY pair eventually fell to its lowest level in August after a series of weak US data pushed Treasury yields lower, giving the yen a morale boost.
Friday’s nonfarm payrolls report wasn’t bad, on the contrary, the data was better than the previous month. However, the labor market trend is still skewed to the downside.
The odds of the Fed cutting interest rates by 50 basis points at its next meeting fell to 27% after the nonfarm payrolls report, with 110 basis points of easing expected by the end of the year. For the Bank of Japan, the market sees a 99% chance of no change at the next meeting and a total of 7 basis points of tightening 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 eventually fell to the August low at 141.70. We are now very close to the key 140.20 level. If the price reaches there, we can expect buyers to step in with a defined risk below the level to pave the way for a rally to the 150.00 level. On the other hand, sellers will want to see the price drop to increase bearish bets to new lows.
USD/JPY Technical Analysis – 4-hour time frame
USD/JPY 4 hours
On the 4-hour chart, we can see that the price action has been range bound between the 143.50 and 141.70 levels. If the price rises, we can expect buyers to gather and position themselves in preparation for a rally towards the trend line around the 146.00 level. Conversely, if the price drops lower, sellers will increase their bearish bets towards the 140.20 level targeting a break below it.
USD/JPY Technical Analysis – 1-Hour Time Frame
USDJPY 1 hour
On the 1-hour chart, we can more clearly see the volatile price action over the past few days. The non-farm payrolls report was supposed to trigger a bigger reaction, but due to the mixed data, the market has been stuck in a consolidation mode. The red lines mark the average daily range for the day.
Upcoming incentives
Tomorrow we have the US Small Business Optimism Index. On Wednesday we have the US CPI report. On Thursday we have the latest US jobless claims and US PPI data. On Friday we wrap up the week with the University of Michigan Consumer Confidence report.