Fundamental Overview
The USD got under some pressure last Friday following the ugly University of Michigan survey where consumer sentiment got revised lower and long-term inflation expectations higher. The market responded by increasing more aggressively the expectations for more easing from the Fed which triggered some short-term weakness in the greenback.
Today, we got some positive comments from Trump regarding tariffs as he said that he was going to be nice on tariffs. Unfortunately, there’s been lots of noise around tariffs in the past weeks and it’s hard to trust anything until the official unveiling of the plan tomorrow. But in the short-term, we could see some risk-on sentiment.
On the JPY side, the currency has been driven mainly by global events rather than domestic fundamentals as the market continues to price in around 31 bps of tightening by year-end. The latest appreciation in the JPY was triggered by the risk-off flows last Friday but as the sentiment started to improve, the yen gave almost everything back.
USDJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDJPY pulled back to retest the broke trendline and the key 148.60 level. The buyers stepped in there with a defined risk below the level to position for a rally into the 160.00 handle. The sellers, on the other hand, will want to see the price breaking lower to regain control and start targeting the 140.00 handle next.
USDJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong resistance around the 151.00 handle where the price got rejected from several times in the past months. The current price action looks like it formed the right should of an inverted head and shoulders pattern with the 151.00 handle as the neckline.
The buyers will want to see the price breaking above the neckline to increase the bullish bets into new highs, while the sellers will likely step back in again there to position for a drop into new lows.
USDJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor counter-trendline that could turn into a bullish flag. On an intraday basis, the buyers will look for the price to break higher to increase the bullish bets into the 151.00 handle, while the sellers will likely lean on the trendline to target another drop into the 148.60 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US Job Openings and the US ISM Manufacturing PMI. Tomorrow, we have the US ADP and the unveiling of the US reciprocal tariffs plan. On Thursday, we get the US ISM Services PMI and the latest US Jobless Claims figures. On Friday, we conclude the week with the US NFP report and Fed Chair Powell speech.
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This article was written by Giuseppe Dellamotta at www.forexlive.com. Read More Details
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