February 05, 2025 at 06:25AM
Fundamental
Overview
The USD opened the week
higher across the board as Trump followed through with his threats and imposed
tariffs on Canada, Mexico and China on Saturday. Thankfully, it seems like
Trump continues to use tariffs as a way to bring countries to the table and get
some resolutions on his demands.
In fact, after some
positive talks on Monday, the tariffs on Mexico and Canada have been paused for
30 days which brought some risk-on sentiment and weighed on the US Dollar. We
are still waiting for the Trump-Xi call but there’s still some cautious
optimism that continues to weigh on the greenback.
On the JPY side, today we
got the Japanese wage data which beat expectations by a big
margin and gave the yen a strong boost as the market increased the bets for a
potential third hike this year. As a reminder, the BoJ hiked interest rates by 25 bps as widely expected at the
last meeting but didn’t offer much in terms of forward guidance other than the
usual “will raise policy rate if economic, price conditions continue to
improve”.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY continues to edge lower after falling back below the major trendline as the sellers piled in with
more conviction targeting the 149.00 handle. There’s not much else we can glean
from this timeframe, so we need to zoom in to see some more details.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we’ve been having a pretty choppy price action around the trendline
but the bearish trend remained intact as signalled by the lower highs. The
price today broke below the support zone around the 153.70 level following the
strong Japanese wage growth data.
If we get a retest of the support now turned resistance, we can expect the sellers to step
in with a defined risk above the resistance to position for new lows. The
buyers, on the other hand, will want to see the price breaking higher to
position for a pullback into the downward trendline around the 155.00 handle.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a minor downward trendline adding confluence to the resistance zone. This should
technically strengthen the resistance and give the sellers more conviction to
step in there targeting new lows.
The buyers, on the other hand, will look for
a break above the resistance and the trendline to position for a pullback into
the 155.00 handle. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US ADP and the US ISM
Services PMI. Tomorrow, we get the latest US Jobless Claims figures. On Friday,
we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
