The USD weakened across the board last week due to a more dovish than expected FOMC decision, in which the Fed decided to signal a deeper QT cut starting in June and the chair of the Fed Powell repeatedly pushed back on rate hike expectations. Additionally, data released Friday showed the Fed could actually keep rates high for longer as job and wage growth slow.
The JPY, on the other hand, does not have much fundamental support as the BoJ may not be able to raise interest rates again given falling inflation rates, even if hawkish messaging around the interest rate reduction could provide some support in the short term. Quantitative easing program. All things being equal, the USDJPY pair is expected to remain in an uptrend relative to both the Fed’s longer-term higher stance and global growth expectations.
USDJPY Technical Analysis – Daily Time Frame
USDJPY Daily
On the daily chart, we can see that USDJPY has bounced off the strong support zone around the 152.00 handle, where the confluence of the trendline and the 61.8 Fibonacci retracement level is located. %. Buyers stepped in and bought the dip offered by the failed US NFP report, as it didn’t change much overall. Sellers will need the price to move below the trendline to change the bias and start looking for new lows with the 146.00 handle as their first target.
USDJPY Technical Analysis – 1 Hour Time Frame
USDJPY 1 hour
On the hourly chart we can see that we now have strong resistance around the 155.00 handle where we can also find the downtrend line defining the current short-term downtrend. This is where we can expect sellers to step in with a set risk above the trendline and position for a break below 152.00 support with a better risk/reward setup. Buyers, on the other hand, will want to see the price move higher to increase bullish bets to the 160.00 handle.
Upcoming catalysts
This week is pretty empty on the data front, with the only notable releases being Japan’s wage data, U.S. jobless claims on Thursday and the University of Michigan Consumer Confidence Survey on Friday. They are unlikely to change market expectations that much, so price action could remain tepid heading into US CPI next week, although the bias is expected to remain bullish.
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