The US Dollar continues to
pull back from the highs as the market reached the peak in the repricing of
interest rates expectations and it will need stronger reasons to price out the
remaining rate cuts for 2025.

This was signalled by the
lack of US Dollar strength after lots of strong US data with the market’s
pricing remaining largely unchanged around three rate cuts by the end of 2025.
We might see the greenback remaining on the backfoot at least until the US CPI
due next week.

On the JPY side, the latest
Tokyo CPI showed inflation accelerating across the board. BoJ Governor Ueda
said that interest rate hikes are nearing as economic trends develop in line
with the central bank’s forecasts.

The market is pricing a 58%
chance of a rate hike in December and a total of 51 bps of tightening by the
end of 2025. We will get the Japanese wage data on Friday and an upside
surprise might give the JPY another boost. The December meeting is now
definitely live.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY eventually fell all the way back to the 149.50 level. The price
bounced from it as the buyers stepped in with a defined risk below the level to
position for a rally back into the highs. The sellers will want to see the
price breaking lower to increase the bearish bets into new lows.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that from a risk management perspective, the sellers will have a much
better risk to reward setup around the 151.90 level where we can find the confluence of the trendline and the 38.2% Fibonacci retracement level. The buyers, on the other
hand, will look for a break above that resistance zone to increase the bullish bets
into the 160.00 handle next.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we a minor resistance zone around the 150.50 level where the price
reacted from several times in the past days. We can expect the sellers to step
in again here to position for the break below the 149.50 support. The buyers,
on the other hand, will look for a break higher to increase the bullish bets
into the 151.90 resistance. The red lines define the average daily range for today.

Upcoming
Catalysts

Today, we
have the US ISM Manufacturing PMI and Fed’s Waller speaking. Tomorrow, we get
the US Job Openings data. On Wednesday, we have the US ADP, the US ISM Services
PMI and Fed Chair Powell speaking. On Thursday, we get the latest US Jobless
Claims figures. Finally, on Friday, we conclude the week with the Japanese
Average Cash Earnings and the US NFP report.

See the video below

This article was written by Giuseppe Dellamotta at www.forexlive.com.