USDJPY Technical Analysis – All eyes on the US CPI

Fundamental Overview

The USD has come under strong pressure recently as the weaker US data finally triggered a deeper pullback in the greenback from the stretched long positions accumulated in the past two quarters. The market pricing switched pretty fast from expecting just one cut a couple of weeks ago to three now.

The main event this week is the US CPI report. Higher than expected data will likely give the greenback a boost in the short term as markets pare back their rate cuts expectations. Conversely, a soft report could see more weakness for the US Dollar ahead of the FOMC decision next week.

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. The market is still pricing in around 36 bps of tightening by year-end with traders awaiting more data on the inflation front to increase the expectations for another rate hike.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY is trading below the key 148.60 level. From a risk management perspective, the sellers will have a better risk to reward setup around the 148.60 level to position for further downside, while the buyers will need the price to break higher to start targeting the trendline.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a minor downward trendline defining the bearish momentum on this timeframe. The sellers will likely continue to lean on the trendline to keep pushing into new lows, while the buyers will look for a break higher to pile in for the pullback into the major trendline.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, there’s not much else we can add here as the sellers will likely step in around these levels, while the buyers will look for a break above the trendline to position for new highs. The red lines define the average daily range for today.

Upcoming Catalysts

Today we have the NYFed Consumer Inflation Expectations. Tomorrow, we get the US Job Openings data. On Wednesday, we have the US CPI report. On Thursday, we get the US PPI data and the US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.

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