Fundamental Overview
The USD rise stalled last
week as the US government shutdown delayed many key US economic reports. The
dollar “repricing trade” needs strong US data to keep going, especially on the
labour market side, so any hiccup on that front is likely to keep weighing on
the greenback. The market pricing is now back to 46 bps of easing by year-end
and 112 bps by the end of 2026. This could still be too dovish, but we will
need strong data to reprice.
In the absence of the
government data, an October rate cut is now seen as a done deal. The reality is
that an October cut was never really in question. It’s the December cut that
could be priced out in case the data strengthens. We still have three NFP and
two CPI reports before the December meeting.
On the JPY side, the victory
of Takaichi over the weekend resulted in a big negative gap at the open for the
yen as traders priced in more expansionary fiscal policy and a delay to rate
hikes from the BoJ. The ball is now in the central bank’s court as traders will
be focused on BoJ’s forward guidance.
USDJPY
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDJPY gapped higher at the open and extended the rally into new
highs. The natural target should be the resistance around the 151.00 handle. That’s
where we can expect the sellers to step in with a defined risk above the 151.20
level to position for a drop back into the major trendline. The buyers, on the other hand,
will want to see the price breaking higher to increase the bullish bets into the
154.80 level next.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have two support zones:
- A minor one around the 150.00 handle
- And a major one around the 148.50
level
The buyers will likely lean
on those supports to keep pushing into new highs, while the sellers will look
for downside breaks to target new lows.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see more clearly the recent price action. There’s not much else we can add here
as the sellers will likely step in around the 151.00-151.20 area, while the
buyers will look for a breakout to target new highs. On Thursday, we
have Fed Chair Powell speaking and the US Jobless Claims figures (if the
shutdown is lifted). On Friday, we conclude the week with the University of
Michigan Consumer Sentiment report
