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USDJPY Technical Analysis – Path of Least Resistance Remains Upward

Fundamental Overview

The USD benefited from strong US consumer confidence data, which triggered an aggressive rise in long-term Treasury yields. However, the report just showed that the labor market remains resilient, which is good news for growth and not necessarily bad news for inflation. Additionally, end-of-month flows may have distorted price action over the past two days, leading to some risk-off sentiment and boosting the yen.

The USD is expected to remain supported against the JPY amid the Fed’s long-term bullish stance and positive risk sentiment, as both scenarios are negative for the Yen. The trend will likely only change when we start to get data on the US recession that prompts the market to price in a more aggressive rate cut path and results in some risk aversion.

USDJPY Technical Analysis – Daily Time Frame

USDJPY Daily

On the daily chart, we can see that USDJPY continues to advance amid resilient US economic data. From a risk management perspective, buyers will have a better risk/reward ratio around the trendline, although we will likely need weak US data or a bearish US CPI surprise to trigger a Also important correction. For now, the path of least resistance remains to the upside.

USDJPY Technical Analysis – 4 hour time frame

USDJPY 4 hours

On the 4-hour chart, we can see that the price has consolidated around the 157.00 handle. There is good support for buyers around the minor trendline where one can also find the 38.2% Fibonacci retracement level for the confluence. Sellers will want to see the price move below the trendline to then extend the correction to the major trendline.

USDJPY Technical Analysis – 1 Hour Time Frame

USDJPY 1 hour

On the hourly chart, we can more clearly see price action in a range between support at 156.50 and resistance at 157.20 over the past two weeks. We recently experienced a breakout as Treasury yields rallied, but all gains were erased yesterday with no clear catalyst.

This could be due to end-of-month flows which distort price movements. The red lines represent today’s average daily range. If we get a weak US PCE, we could see a pullback into the trendline where buyers will likely step in to buy the dip. On the other hand, a break above resistance should see bullish momentum increase.

Upcoming catalysts

Today, we conclude the week with the US PCE report which should not change much for the Fed, as the central bank remains in “wait and see” mode. Still, a cold report could weigh on USDJPY in the near term while hot numbers should give it a boost.

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