Analysis of USDJPY Technicals on Forexlive

US

• The Fed left interest rates unchanged as expected with basically no change to the statement.
• Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
• The recent US Core PCE came in line with expectations.
• The labour market is starting to show some weakness as Continuing Claims yesterday showed another increase and the NFP data last Friday missed across the board.
• The US Consumer Confidence fell for the third consecutive month although the data beat expectations.
• The US ISM Manufacturing PMI last week missed expectations by a big margin, followed later on Friday with a disappointing ISM Services PMI, although the index remained in expansion.
• The market doesn’t expect the Fed to hike anymore.

Japan

• The BoJ kept its monetary policy basically unchanged but formally widened the YCC to 1% on the 10-year JGBs stating that it will be a reference cap.
• Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed and that they are not foreseeing sustainable price increases.
• The recent Japanese CPI showed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
• The Unemployment Rate remained unchanged near cycle lows.
• The Japanese Manufacturing PMI matched the prior reading remaining in contraction with the Services PMI falling but holding on in expansion.
• The latest Japanese wage data beat expectations. As a reminder the BoJ is focusing on wage growth to decide when to tweak its monetary policy.
• The market expects the BoJ to keep interest rates unchanged at the next meeting as well.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that the USDJPY pair erased almost all the losses from last week as the US Dollar benefited from a bounce in Treasury yields and a hawkish Fedspeak. It looks like the pair is bound to test the highs again and maybe even make a new cycle high, but the divergence with the MACD continues to call for caution, especially since the US labor market is showing clear signs of softening.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the pair managed to break above the resistance zone around the 150.70 level and the buyers increased their bullish bets into the recent high as a consequence. The sellers are likely to step in around the cycle high at 151.90 to position for a drop into the black trendline and eventually a break lower. The buyers, on the other hand, will want to see the price breaking higher to target the upper bound of the rising channel around the 153.00ish level.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can notice that we have a divergence with the MACD on this timeframe as well, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the price is likely to pullback into the trendline where the buyers should step in again to target new higher highs. The sellers, on the other hand, will want to see the price breaking lower to confirm a reversal and target the support at 150.70 first and eventually the trendline around the 149.80ish level.

Upcoming Events

Today the only market moving event will be the release of the University of Michigan Consumer Sentiment report. Strong readings might support the USD further, while weak figures are likely to weigh on the greenback.

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