USDJPY Technical Analysis – JPY strength resumes as Treasury yields fall

Fundamental Overview

The US Dollar this week has been erasing some of the losses experienced last week after the benign US PPI and the Trump’s reciprocal tariffs announcement. There hasn’t been any notable catalyst this week to support the greenback although some analysts pointed to less dovish comments from Fed’s Waller on Tuesday which would explain the rise in Treasury yields that followed afterwards.

Yesterday, during the Asian session we got some positive headlines on the tariffs side as Trump said that a new trade deal with China was possible. That weakened the US Dollar which continued to depreciate throughout the European and US sessions.

On the JPY side, we got the Japanese CPI report today which saw another uptick in Core inflation, which is what the BoJ is focused on. The Tokyo CPI released a couple of weeks before the National CPI is generally the one that moves the market as it leads the Japanese CPI figures. The market continues to fully price in the next rate hike in September with a total of 35 bps of tightening expected by year-end.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY broke below the 150.93 low and extended the drop below the 150.00 handle before pulling back a bit. The price is now coming back to retest the 150.93 level. This is where we can expect the sellers to step in with a defined risk above the level to position for the drop into the 148.60 level next. The buyers, on the other hand, will look for a break higher to extend the pullback into the major trendline.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a minor downward trendline defining the current bearish momentum. The sellers will likely lean on the trendline with a defined risk above it to keep pushing into new lows. The buyers, on the other hand, will look for a break higher to pile in for a rally into the major trendline next.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, there’s not much we can add here as the sellers will look for a rejection from the trendline, while the buyers will look for a break higher to extend the pullback into the next major trendline. The red lines define the average daily range for today.

Upcoming Catalysts

Today we conclude the week with the US Flash PMIs.

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