Fundamental
Overview
The USD continues to be
supported amid the ongoing de-escalation in trade wars. This has most likely to
do more with positioning rather than fundamentals. The short dollar trade got
very overstretched so positive news on the tariffs front is providing a pullback.
In the medium term, the US Dollar should keep on depreciating as the path of
least resistance for the Fed remains to cut rates.
On the JPY side, the
currency has been driven mainly by global events rather than domestic
fundamentals. Alongside the Swiss Franc, it’s been the favoured safe haven in
the currencies space and as the sentiment improves, the Yen weakens. On the monetary
policy front, the negative impact on the Japanese economy from tariffs
uncertainty and the downward pressure on inflation from the surging yen will
keep the BoJ on the sidelines for the time being.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY bounced from the key 140.00 handle and pulled all the way back
to the 144.00 level. The sellers will likely pile in
around these levels with a defined risk above the resistance to position for a
drop back into the 140.00 handle. The buyers, on the other hand, will want to
see the price breaking higher to increase the bullish bets into the major
trendline.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a minor upward trendline defining the bullish momentum on this
timeframe. The buyers will likely continue to lean on the trendline to keep
pushing into new highs, while the sellers will look for a break lower to
increase the bearish bets into new lows. On Wednesday, we have the US ADP, the US Q1
GDP and the US Employment Cost Index. On Thursday, we have the BoJ Policy
Decision, the US Jobless Claims and the US ISM Manufacturing PMI. On Friday, we
conclude the week with the US NFP report. As a reminder, the market is focused
on tariff related news at the moment, so the data is not as market-moving as it
used to be in the past months
