USDJPY Technical Analysis – All eyes on the US CPI

Fundamental
Overview

The USD has come under
strong pressure recently as the weaker US data finally triggered a deeper
pullback in the greenback from the stretched long positions accumulated in the
past two quarters. The market pricing switched pretty fast from expecting just
one cut a couple of weeks ago to three now.

The main event this week is
the US CPI report. Higher than expected data will likely give the greenback a
boost in the short term as markets pare back their rate cuts expectations.
Conversely, a soft report could see more weakness for the US Dollar ahead of
the FOMC decision next week.

On the JPY side, nothing
has changed fundamentally but the Japanese Yen has been supported across the
board by the risk-off sentiment and falling Treasury yields. The market is
still pricing in around 36 bps of tightening by year-end with traders awaiting
more data on the inflation front to increase the expectations for another rate
hike.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY is trading below the key 148.60 level. From a risk management
perspective, the sellers will have a better risk to reward setup around the
148.60 level to position for further downside, while the buyers will need the
price to break higher to start targeting the trendline.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor downward trendline defining the bearish momentum on
this timeframe. The sellers will likely continue to lean on the trendline to
keep pushing into new lows, while the buyers will look for a break higher to
pile in for the pullback into the major trendline.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else we can add here as the sellers will likely step in around these
levels, while the buyers will look for a break above the trendline to position
for new highs. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the NYFed Consumer Inflation
Expectations. Tomorrow, we get the US Job Openings data. On Wednesday, we have
the US CPI report. On Thursday, we get the US PPI data and the US Jobless
Claims figures. On Friday, we conclude the week with the University of Michigan
Consumer Sentiment report.

Watch the video below

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