USDJPY Technical Analysis – the JPY remains supported amid risk-off sentiment

Fundamental Overview

The USD has been relatively stronger against most major currencies since Friday as the markets went into risk-off following some bad US data release. In fact, we got a weak US Flash Services PMI and soon after that the long-term inflation expectations in the Final UMich Consumer Sentiment survey jumped to a new 30-year high.

The risk-off sentiment picked up after the jump in the long-term inflation expectations. 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.

On the JPY side, nothing has changed fundamentally but the Japanese Yen has been supported across the board by the risk-off sentiment which continues to drive Treasury yields lower.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY is trading near the key 148.60 swing level. This is where we can expect the buyers to step 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 that we have a minor downward trendline defining the current bearish momentum. The sellers will likely continue to 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, we can see that the price broke below the counter-trendline this morning with the sellers piling in to target a drop into the 148.60 level. That’s where we can expect the buyers to step in to position for a rally into new highs. The red lines define the average daily range for today.

Upcoming Catalysts

Today we have the US Consumer Confidence report. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the Tokyo CPI and the US PCE data.

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