USDJPY Technical Analysis | Forexlive

USD

• The Fed left interest rates unchanged as expected at the last meeting, with virtually no change in its statement. The Dot Plot showed three more rate cuts for 2024 and the economic projections were improved with higher growth and inflation and lower unemployment.
• The US CPI beat expectations for the third consecutive month, while the US PPI was in line with forecasts.
• U.S. NFP beat expectations across the board, although average hourly earnings were in line with forecasts.
• The US ISM Manufacturing PMI significantly beat expectations as the price component continued to rise, while the US ISM Services PMI missed expectations with the price index falling to a 4-year low.
• The market now expects a first rate cut in September.

JPY

• The BoJ finally ended its negative interest rate policy, as planned at the last meeting, by raising interest rates by 10 basis points, bringing the rate back to a target of between 0.00 and 0. .10%. Additionally, the central bank abandoned yield curve control and ETF purchases, while maintaining QE.
• The latest unemployment rate fell short of expectations, although it continues to hover around cycle lows.
• Japanese PMIs have further improved for both manufacturing and services measures, although the former remain in contraction territory.
• The latest Japanese salary data is in line with expectations.
• Tokyo’s CPI, considered a leading indicator of the national CPI, came in line with expectations.
• The market expects another rate hike from the BoJ this year, although the timing remains uncertain.

USDJPY Technical Analysis – Daily Time Frame

On the daily chart, we can see that USDJPY has finally broken out of consolidation following another hot US CPI report. The breakout of the large ascending triangle could indicate much higher prices ahead, with buyers targeting the 160.00 handle. Sellers will need the price to fall back below the 151.92 level to start looking for new lows, as buyers are now in full control.

USDJPY Technical Analysis – 4 hour time frame

On the 4 hour chart we can see that from a risk management perspective, buyers will have a better risk to reward a setup around the trendline where they will also find the Fibonacci retracement level of 38, 2% for the confluence. Sellers, on the other hand, will want to see the price move below the trendline and the 151.92 level to invalidate the bullish setup and position for a fall to new lows.

USDJPY Technical Analysis – 1 Hour Timeframe

On the hourly chart, we can see that the recent price action has formed an ascending wedge and diverged with the MACD. This is usually a sign of weakening momentum, often followed by pullbacks or reversals. In this case, it could be a signal for a pullback in the trendline and Fibonacci retracement level. Therefore, if price were to break the gap to the downside, we can expect sellers to position themselves for a decline into the trendline.

Events to come

Today we wrap up the week with the University of Michigan Consumer Sentiment Survey.

Watch the video below