FUNDAMENTAL OVERVIEW
USD:
The US Dollar spiked higher
yesterday following a strong US
NFP report as the market pared back slightly Fed rate cut bets but
surprisingly gave back all the gains. Maybe the market is still too convinced
of more labour market weakness to come, or it decided to wait for the US CPI.
Whatever the reason, the data since the start of the year has been clearly pointing
to improving conditions that do not justify further rate cuts.
The focus now turns to the
US CPI report coming up tomorrow. If we get hot data, I can’t see how the market
could brush that off like it did with the NFP. The hawkish repricing will likely
be more substantial and trigger a more sustained rally in the greenback. On the
other hand, soft data shouldn’t change much in terms of market pricing but could
keep the dollar under pressure.
JPY:
On the JPY side, we’ve seen
a big “sell the fact” trade following the widely expected Takaichi’s victory in
the lower house elections, but other than that, nothing has changed. In fact,
the data hasn’t been supporting urgent rate hikes, and we haven’t got anything
new from the central bank either. As a reminder, the BoJ held interest rates steady
as expected at the last policy meeting and upgraded slightly growth and
inflation forecasts due to the expansionary fiscal policies.
Governor Ueda didn’t offer
anything new in terms of forward guidance as he just repeated that they will
keep raising rates if the economic outlook is realised. He also added that
April price behaviour will be a factor to mull over a rate hike. This suggests
that April is when they expect to deliver another rate hike if the data
supports such a move.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPY fell all the way back to the
major trendline. We can expect the buyers to step in around these levels with a
defined risk below the trendline to position for a rally into the 159.00 handle.
The sellers, on the other hand, will look for a break lower to increase the
bearish bets into the 145.00 level next.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see more clearly the strong support at the 152.00 handle where we can find the confluence
of the January low and the major trendline. Again, this is where we can expect
the buyers to step in to position for new highs, while the sellers will look for
a break to extend the drop into new lows.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see a minor downward trendline defining the bearish momentum. The sellers will
likely continue to lean on the trendline with a defined risk above it to keep
pushing into new lows, while the buyers will look for a break higher to
increase the bullish bets into the 159.00 level next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the US Jobless Claims figures, while tomorrow we conclude the
week with the US CPI report.
This article was written by Giuseppe Dellamotta at investinglive.com.
