USDJPY Technical Analysis

USD

• The Fed left interest rates unchanged as expected at the last meeting with basically no
  change to the statement. The Dot Plot still showed three rate cuts for 2024 and
  the economic projections were upgraded with growth and inflation higher and the
  unemployment rate lower.
• The US CPI beat expectations for the third
  consecutive month, while the US PPI came in line with forecasts.
• The US NFP beat expectations across the board
  although the average hourly earnings came in line with forecasts.
• The US ISM Manufacturing PMI beat expectations by a big margin with
  the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to
  the lowest level in 4 years.
• The market now expects the first rate cut in
  September.

JPY

• The BoJ finally exited the negative interest rates
  policy as expected at
  the last meeting raising interest rates by 10 bps bringing the rate to a target
  between 0.00-0.10%. Moreover, the central bank scrapped the yield curve control
  and the ETF purchases, while maintaining QE in place.
• The latest Unemployment Rate missed expectations although it
  continues to hover around cycle lows.
• The Japanese PMIs improved further for both the
  Manufacturing and Services measures although the former remains in
  contractionary territory.
• The latest Japanese wage data came in line with expectations.
• The Tokyo CPI, which is seen as a leading
  indicator for National CPI, came in line with expectations.
• The market expects another rate hike
  from the BoJ this year although the timing remains uncertain.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that USDJPY finally broke out of the consolidation following another hot US CPI
report. The breakout of the big ascending triangle could
point to much higher prices ahead with the buyers targeting the 160.00 handle. The
sellers will need the price to fall back below the 151.92 level to start
looking for new lows as the buyers are now in full control.

USDJPY
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that from a risk
management perspective, the buyers will have a better risk to reward setup
around the trendline where
they will also find the 38.2% Fibonacci retracement level
for confluence. The
sellers, on the other hand, will want to see the price breaking below the
trendline and the 151.92 level to invalidate the bullish setup and position for
a drop into new lows.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
recent price action formed a rising wedge and diverged with
the MACD. This
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, it could be a signal for a pullback into the trendline
and the Fibonacci retracement level. Therefore, if the price were to break the
wedge to the downside, we can expect the sellers to pile in to position for a
drop into the trendline.

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This article was written by FL Contributors at www.forexlive.com.