USDJPY Technical Analysis

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The US economic data has
been surprising to the upside since the last FOMC meeting. Given the Fed
willingness of hiking another two or more times if the data remains strong, the
market repricing interest rates expectations on the more hawkish side. Although
this development led to higher Treasury yields, the USDJPY pair struggled to
take off and instead pulled back.

On the other hand, the BoJ
maintains its dovish stance keeping rates at -0.10 and the YCC at the usual
settings. Core inflation in Japan keeps on rising and there are only slightly
tentative signs of a possible exit from the current policy. So, ss long as the
policy divergence between the two central banks continues, we should see more
higher highs for the pair, all else being equal.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that we finally got a pullback in USDJPY. In fact, the price has fallen into
the trendline where we
can also find confluence with the
38.2% Fibonacci retracement level
and the red 21 moving average. We can
expect the buyers piling in here with a defined risk below the 142.17 support and
target the 150.00 handle. The sellers, on the other hand, will want to see the
price to break below the 142.17 support to pile in and extend the selloff into
the next trendline.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the market
sold off pretty heavily yesterday although the US economic data was solid
pretty much across the board. This is a strange reaction as the US Treasury
yields rallied instead. The market may have just been too much overstretched and
it needed a pullback. This is a key zone now to decide where the USDJPY will go
next. A bounce should lead to another big rally, while a break lower would open
the door for a big selloff into the 139.00 handle.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a swing low resistance at 143.50. If the price pulls back into that level,
we can expect the sellers to pile in there to position for more downside. More
conservative buyers, on the other hand, will want to see the price to break
above that level to confirm the bounce and the continuation of the rally.

Upcoming Events

Today we have the US
NFP report. The market is already expecting good data so the only surprise may
come from a much higher than expected numbers or a miss to the forecasts. In
the first case, we should see the USD appreciate as the market will be pricing
a more hawkish Fed. In the second case, we can expect the USD to weaken as
Treasury yields will drop and take USDJPY with them.

This article was written by FL Contributors at www.forexlive.com.

Go to Forexlive

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