USDJPY Technical Analysis – Eyes on the BoJ and FOMC decisions

Fundamental Overview

The USD continues to remain under pressure against most major currencies despite higher Core PCE estimates following the US CPI and PPI reports, and a better-than-expected Retail Sales data yesterday.

The market pricing for the Fed went from expecting more than 80 bps of easing by year-end at the peak of the risk-off sentiment to roughly 60 bps as of now. That didn’t provide a pullback in the US Dollar selloff though. The focus now switched to the FOMC decision due tomorrow where the Fed is expected to keep rates steady.

On the JPY side, the data recently started to come out on the softer side and Governor Ueda recently didn’t sound like someone who’s in a hurry to raise rates amid some uncertainty. The Japanese Yen in the past couple of weeks has been supported across the board more by the risk-off sentiment and falling Treasury yields rather than domestic fundamentals.

As the risk sentiment improved and Treasury yields bounced, the JPY started to lose ground against most currencies. Tomorrow, we have the BoJ policy decision where the central bank is expected to keep everything unchanged.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY failed to sustain the break below the key 148.60 level and eventually pulled all the way back to the trendline. This is where we can expect the sellers to step in with a defined risk above the trendline to position for a drop into the 140.00 handle. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 160.00 handle next.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we now have an upward minor trendline defining the bullish momentum on this timeframe. If we were to get a pullback into the trendline, we can expect the buyers to lean on it to position for the break above the major trendline, while the sellers will look for a break lower to increase the bearish bets into the 140.00 handle next.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, there’s not much else we can add here as the sellers will look for a rejection around the trendline, while the buyers will target a break above it. The red lines define the average daily range for today.

Upcoming Catalysts

Tomorrow we have the rate decisions from the BoJ and the Fed. On Thursday, we get the US Jobless Claims figures. On Friday, we conclude the week with the Japanese CPI.

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