Yesterday, the US CPI report missed expectations across the board
and led to a big selloff in the US Dollar. The market pricing for a 25 bps hike
at the July meeting hasn’t change though as the labour market tightness and no
hints of a skip or pause from the Fed speakers probably contributed to such
expectation.
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. The BoJ board
members keep on sounding dovish and dismissing any change at the upcoming
meeting. Nevertheless, the market still sees the risk of a surprising change to
the YCC policy.
USDJPY Technical Analysis –
Daily Timeframe
USDJPY Daily
On the daily chart, we can see
that the price is now reacting to a strong support level at
137.95 where we can also find the 61.8% Fibonacci retracement level.
The huge selloff since the miss in the NFP report is a bit overstretched though
as we can see from the price distance from the blue 8 moving average.
Generally, we can see some consolidation or a pullback into the moving average
before the next move.
USDJPY Technical Analysis –
4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can see that the price is
already bouncing from the support zone and if we do get a pullback, the price
should rise into the black downward trendline where it
crosses with the broken blue trendline and the red 21 moving average.
USDJPY Technical Analysis –
1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can see the
resistance zone highlighted by the blue box. That’s where the sellers should
step in with a defined risk above the black trendline and target a break below
the support zone and new lows towards the 130.00 handle. The buyers, on the
other hand, will want to see the price breaking above the resistance zone and
the black trendline to pile in and start positioning for new highs towards the
142.00 handle.
Upcoming Events
Today the market is
likely to focus on the US Jobless Claims as the labour market remains tight and
it may keep inflation high or even lead to another inflationary wave in the
future. The market should react only to a big miss or a big beat. If the data
beats expectations, we should see a pullback in USDJPY. On the other hand, if
the data misses, we should see another wave of selling. Tomorrow, we wrap up
the week with the University of Michigan Consumer Sentiment report.
