USDJPY Technical Analysis – The JPY thrives amid the risk-off flows

Fundamental Overview

The USD continues to be supported against most major currencies, especially the commodity currencies, as the markets remain in a risk-off mood following some bad US data releases. In fact, since last Friday, we got weak US Flash Services PMI, UMich final Consumer Sentiment and this a weak US Consumer Confidence report on Tuesday.

The problem is that we’ve also got inflation expectations jumping to new highs in both the UMich and the Conference Board report. The market might be fearing that in case we get a slowdown, the Fed might not be fast enough in cutting rates amid inflation remaining above target and uncomfortably high long-term inflation expectations.

This is something to keep in mind in light of the next NFP and CPI reports coming out before the March FOMC decision where we will also get the updated SEP and Dot Plot. Today, we get the US Jobless Claims figures and if we get a new high in the data, then we can expect another wave of risk-off flows.

On the JPY side, nothing has changed fundamentally but the Japanese Yen has been supported across the board by the risk-off sentiment and falling Treasury yields. Tomorrow, we get the Tokyo CPI where hot numbers might see the markets adding more to their bets of a third hike by the end of the year.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY is consolidating around the key 148.60 level. This is where the buyers are stepping in with a defined risk below the level to position for a rally into the 160.00 handle. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 140.00 handle next.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more clearly the rangebound price action around the key level as the bearish momentum waned. There’s not much else we can add here as the buyers will look for a bounce and a rally into the major trendline, while the sellers will look for a break lower to push into new lows.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have a minor downward trendline defining the current consolidation around the lows. The sellers will likely continue to lean on the trendline to position for the break below the support, while the buyers will look for a break higher to increase the bullish bets into the 150.93 level next. The red lines define the average daily range for today.

Upcoming Catalysts

Today we get the latest US Jobless Claims figures, while tomorrow we conclude the week with the Tokyo CPI and the US PCE data.