USDJPY Technical Analysis

USD

• The Fed left interest rates unchanged as
  expected at the last meeting and dropped the tightening bias in the statement.
• The US CPI and
  the US PPI beat
  expectations for the second consecutive month.
• The NFP report beat
  expectations on the headline number, but the unemployment rate and the average
  hourly earnings missed notably. Moreover, the US Jobless Claims beat
  expectations across the board with a big positive revision to Continuing
  Claims.
• The latest US ISM
  Manufacturing PMI missed expectations by a big margin
  remaining in contraction with the US ISM Services
  PMI
  following suit but holding on in expansion.
• The US Retail Sales missed
  expectations across the board although the data improved from the prior month.
• The market sees basically a 50/50 chance of a hike
  in June now.

JPY

• The BoJ finally exited the negative interest rates
  policy as expected
  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 as expected.
• BoJ Governor Ueda said that they are at a phase where
  they can slowly proceed with possible rate hikes. So, the data will be
  important in the next months for further actions.
• The latest Unemployment Rate remained unchanged hovering around
  cycle lows.
• The Japanese PMIs improved for both the Manufacturing
  and Services measures although the former remains in contractionary territory.
• The Japanese wage data beat expectations by a big margin
  which then led to the rate hike from the BoJ.
• The Tokyo CPI, which is seen as a leading
  indicator for National CPI, recently came in line with expectations with the
  measures increasing from the prior report.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that USDJPY bounced on the 146.50 level and started to rally with almost no
pullback as the strong US data switched the market focus from the BoJ to a
possibly hawkish FOMC rate decision. The price today broke through the 150
handle as the market “sold the fact” on the BoJ hike and further Yen gains will
depend on the next set of data. There’s not much else to glean from this
timeframe, so we need to zoom in to see some more details.

USDJPY
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a support now
around the 149.21 level where we can also find the confluence of the trendline and the
red 21 moving average. If we
were to get a pullback, that’s where we can expect the buyers to step in with a
defined risk below the support to position for a rally into new highs with a
better risk to reward setup. The sellers, on the other hand, will want to see
the price breaking lower to pile in and position for a drop into new lows.

USDJPY Technical Analysis –
1 hour Timeframe

On the
1 hour chart, we can see more closely the recent price action with the support
zone highlighted by the green box. The buyers will look for a bounce, while the
sellers will look for a breakout. The events in the next days and weeks will
determine where we go from here.

Upcoming Events

Tomorrow we have the FOMC rate decision on the agenda
where the central bank is expected to keep rates unchanged. On Thursday, we
have the US Jobless Claims figures and the latest Japanese and US PMIs.
Finally, on Friday, we conclude the week with the Japanese CPI data.

See the video below

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