The main narrative for the greenback’s weakness is once again
de-dollarisation due to the messy and aggressive US policies. The squeeze on
recent dollar longs might be more about positioning though.
Given the recent USD
strength on some slightly hawkish repricing, this latest escalation kind of
unwinds those bets. If we were to get a de-escalation, we would probably see a
relief rally in the US Dollar, and more so if the economic data in the next
weeks and months strengthens.
Today, all eyes will be on
Davos where Trump will be giving a speech at the World Economic Forum and then
will hold discussions with leaders about Greenland and other matters. Nonetheless,
the currency remains weak given the lack of fundamental changes.
Japanese long-term yields
continue to surge on fiscal concerns and attract attention. US Treasury
Secretary Bessent today said that he’s been in talks with Japanese officials who
told him that they will stabilise the market.
On Friday, the BoJ is expected
to keep interest rates unchanged but watch out for potential trim
in bond tapering pace as that could trigger a relief rally in the bond market,
while also potentially weighing on the yen.
In terms of rate hikes, the
central bank is still placing a great deal on wage growth, but we’ve also got
reports that the weakening yen and its impact on inflation will have more influence
on policy going forward.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPY is now consolidating below the 158.87 level as traders await
new catalysts to push the price in either direction. From a risk management
perspective, the buyers will have a better risk to reward around the 154.50
support zone to position for a rally into new highs. The sellers, on the other
hand, will want to see the price breaking lower to increase the bearish bets
into the major trendline around the 152.00 handle.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see that we an upward trendline defining the bullish momentum on this timeframe.
The buyers continue to lean on the trendline with a defined risk below it to
keep pushing into new highs. The sellers, on the other hand, will look for a
break lower to increase the bearish bets into the 154.50 support next.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the price action turned rangebound. The buyers will
likely continue to lean on the major trendline to keep pushing into new highs,
with a break above the minor counter-trendline around 158.20 likely leading to
stronger upside momentum. The sellers, on the other hand, should wait for a
break below the major trendline to open the door for a fall into the 154.50
support. We have also the Fed’s Cook hearing today at the US Supreme Court. Tomorrow,
we get the latest US Jobless Claims figures. On Friday, we have the Japanese
CPI, the BoJ policy decision and the US Flash PMIs
