FUNDAMENTAL OVERVIEW
USD:
The US dollar has been
supported since the last FOMC decision as the more hawkish than expected dot
plot led to a quick repricing in interest rate expectations with traders increasing
rate hike probabilities.
There is now 32 bps of
tightening priced in by year-end. There's a 29% chance of a hike in July and 62%
probability of a move in September.
There’s been a slightly
dovish repricing in the last few days. One of the reasons could be the huge
selloff in oil prices which have now reached pre-war levels. The other reason
is that the hawkish repricing might have reached a near-term peak and for more
we will likely need upside surprises in the NFP and CPI reports.
Although the greenback
should remain supported into the data, we might start to see some consolidation
or even pullbacks if we don’t get any meaningful catalyst before the key US
data.
JPY:
On the JPY side, nothing
has changed. We started to see a few spikes recently as the USD/JPY pair
reached the highest levels since 2024. It looks more like profit-taking and
waiting for new catalysts rather than outright intervention given the small size
of the moves.
As a reminder, the BoJ
hiked the policy rate to 1.00% as widely expected at the last meeting and
announced the pause to the bond tapering programme from next fiscal year.
The forward guidance
remained the same with the BoJ looking to continue the normalisation process,
raising the policy interest rate and adjust the degree of monetary
accommodation “in response to developments in economic activity and prices as
well as financial conditions”.
BoJ’s Uchida didn’t offer
anything new in the press conference reiterating the central bank’s willingness
to raise rates further if economic conditions align. The divergence with the
Fed will continue to keep the USD/JPY pair skewed to the upside until the US
data starts to point in the other direction.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDJPY - daily
On the daily chart, we can
see that USDJPY is still consolidating near
the 2024 highs as intervention fears are probably capping the momentum. A break
above the 161.95 level would take the pair to the highest level since 1986. We
can expect the sellers to continue to step in around these levels with a
defined risk above the 162.00 handle to position for a drop into the 158.00
support. The buyers, on the other hand, will look for a break to increase the
bullish bets into new highs.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDJPY - 4 hour
On the 4 hour chart, we have
a minor upward trendline defining the bullish momentum. If we get a pullback,
we can expect the buyers to lean on the trendline with a defined risk below it
to keep pushing into new highs. The sellers, on the other hand, will look for a
break lower to extend the pullback into the 160.50 support zone.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
USDJPY - 1 hour
On the 1 hour chart, there’s
not much we can add here as the price action remains rangebound. The only two key
levels in the near-term are the 161.95 resistance and the trendline. The red
lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we get the US Job
Openings data and the US Consumer Confidence report. On Wednesday, we have the
US ADP report and the US ISM Manufacturing PMI. On Thursday, we conclude with the
US NFP report, and the US Jobless Claims figures.
