Fundamental
Overview
The USD rallied across the
board yesterday following an aggressive selloff in the GBPUSD pair as the UK
30yr yield jumped into a new cycle high. Some of the gains were eventually
erased but the greenback remained supported as the price action continues to be
choppy as we head into the key US data.
In fact, traders will be
focused on the US ADP and NFP reports. The data will influence interest rates
expectations greatly. Right now, the market is pricing a 91% probability of a
rate cut in September and a total of 55 bps of easing by year-end.
Strong data might take the
probability for a September cut towards a 50/50 chance but will certainly see a
more hawkish repricing further down the curve and likely support the dollar.
Soft data, on the other hand, will likely see traders increasing the dovish
bets with a third cut by year-end being priced in and weighing on the
greenback.
On the JPY side, we haven’t
got meaningful changes in the fundamentals. In fact, the currency has been rallying
on the back of the dovish expectations for the Fed. For more JPY appreciation
we will need weak US data to increase the dovish bets on the Fed or a series of
higher inflation figures for Japan to price in more rate hikes than currently
expected. The buyers, on the other hand,
will look for a break higher to increase the bullish bets into the 151.00 handle
next.
USDJPY Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we’ve been stuck in a range for a month as traders have been waiting
for the key US data before picking a direction. 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 – 1 hour Timeframe
On the 1 hour chart, we can
see that we might be forming a smaller range at the resistance. The buyers will
want to see the price breaking above the recent high at 148.95 to extend the
rally into the 151.00 handle. The sellers, on the other hand, will look for a
break below the 147.95 level to pile in for a drop into the 146.63 support. Tomorrow,
we get the US ADP, the latest US Jobless Claims figures and the US ISM Services
PMI
